What Happened?

Shares of advertising software maker The Trade Desk (NASDAQ:TTD) fell 33.7% in the afternoon session after the company reported disappointing fourth quarter 2024 financial results. TTD has been public for 33 quarters, and this is the first quarterly earnings where the company missed on both the revenue and EBITDA lines. Adding to the disappointment is guidance for Q1 2025, which also came in below Wall Street's estimates for revenue and EBITDA. 

Management stated that the weak quarter was not due to the macro, market conditions, or competition. Instead, management cited some large internal reorganizations to the sales and engineering teams that led to mis-execution during the quarter. Given the premium valuation and history of beating estimates, shares are reacting strongly to the miss.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy The Trade Desk? Access our full analysis report here, it’s free.

What The Market Is Telling Us

The Trade Desk’s shares are somewhat volatile and have had 13 moves greater than 5% over the last year. But moves this big are rare even for The Trade Desk and indicate this news significantly impacted the market’s perception of the business. 

The previous big move we wrote about was 3 days ago when the stock gained 6.7% on the news that KeyBanc analyst Justin Patterson maintained a Buy rating and raised the price target to $142. Patterson expects The Trade Desk will continue to benefit from an improving advertising market, with expectations of better-than-expected fourth-quarter results when the company reports quarterly results on February 12, 2025 (later in the week). The main drivers behind this optimism seem to be the continued rise of connected TV (CTV), retail media, and audio, along with the OpenPath initiative. These factors are expected to help TTD achieve sustained annual revenue growth exceeding 20% and contribute to healthy margin expansion.

The Trade Desk is down 30.5% since the beginning of the year, and at $81.79 per share, it is trading 41.4% below its 52-week high of $139.51 from December 2024. Investors who bought $1,000 worth of The Trade Desk’s shares 5 years ago would now be looking at an investment worth $2,668.

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