The Trade Desk stock price has suffered a harsh reversal as it moved from the best performer in the Nasdaq 100 Index in 2024 to the worst one. TTD plunged to a low of $46.50 on Wednesday, its lowest level since April 9.
It has dropped by 67% from its highest level in December, erasing over $47 billion in value. So, is it safe to buy the TTD stock today?
Why The Trade Desk stock has plunged
The Trade Desk is a top company that operates a demand-side platform (DSP) for digital advertising, providing companies and agencies tools to buy and manage advertising across the internet.
The company also automates the purchase of ad inventory across websites, connected TVs, and other media platforms. This is a big industry with a total addressable market of over $1 trillion.
The Trade stock price plunged on Wednesday after an analyst from Morgan Stanley slashed his outlook and warned about its revenue growth. Matthew Cost lowered the price target from $80 to $50, while maintaining a hold rating.
Cost joins other top analysts who have slashed its target lately. Chris Kuntarich, an analyst from UBS, lowered his target from $105 to $80, while Michael Nathanson of MoffettNathanson placed a sell rating with a target of $45.
Not every analyst is bearish on The Trade Desk stock. In a statement after the Morgan Stanley report, Justin Patterson of KeyBanc, placed a target of $88 as he maintained a buy rating.
Trade Desk earnings download
The recent phase of the Trade Desk stock price plunge started after the company published its second-quarter results last month.
These results showed that the company’s business was growing. However, investors were disappointed with its forward guidance, which was lower than expected.
The Trade Desk’s revenue rose from $585 million in the second quarter of 2024 to $694 million, a 19% annual increase. Similarly, its half-year revenue rose by 22% to $1.31 billion. However, its net income margin dropped to 13% from 15% a year earlier.
Analysts expect that The Trade Desk growth will continue slowing as it did in the second quarter. The average estimate is that the revenue will be $718 million in the third quarter, a 14% annual increase.
Read more: Trade Desk has fallen steeply after S&P 500 inclusion: what should you do with the stock?
It will then slow to 11.8% in the fourth quarter to $829 million, which will bring the annual revenue figure to $2.86 billion.
TTD stock is still highly overvalued despite the recent crash. The forward price-to-earnings ratio stands at 63, much higher than the sector median of 19. This multiple is also higher than that of other companies, including popular names like Microsoft and NVIDIA.
The Trade Desk stock price analysis
The weekly timeframe chart shows that the TTD stock price has been in a strong downward trend in the past few months, moving from a high of $142 in November last year to $46 today.
A closer look shows that the stock is about to form a death cross pattern, which happens when the 50-week and 200-week moving averages cross each other. This cross normally leads to more downside over time.
The TTD stock price is approaching the important support level at $42, its lowest level on April 7. Therefore, the most likely scenario is where the stock continues falling as sellers target $42. A drop below that level will point to more downside, potentially to the key point at $38.5, its lowest level in July 22nd.
Read more: From best to worst: Why Trade Desk stock has crashed and what next
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