Why The Trade Desk Stock Lost 24% in August
Key Points
The Trade Desk reported just 3% revenue growth in the second quarter and missed estimates on the top and bottom lines.
Several analysts downgraded the stock after the report.
CEO Jeff Green doesn't seem to grasp the full scope of the challenges facing the company.
Shares of The Trade Desk (NASDAQ: TTD) were heading lower again last month as the demand-side adtech platform (DSP) again disappointed investors in its second-quarter earnings report.
The company, the leading independent DSP, posted another round of slowing revenue growth and falling profits, as it seems to be losing market share to so-called "walled gardens" like Alphabet, Meta Platforms, and Amazon.
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According to data from S&P Global Market Intelligence, The Trade Desk finished the month down 24%. As you can see from the chart below, the stock plunged early in the month after the report came out, and stayed down from there.
The Trade Desk's struggles continue
In less than two years, The Trade Desk has lost roughly 90% of its value, an epic collapse of a company that was once considered a top growth stock.
In the second-quarter report, The Trade Desk reported the slowest revenue growth in its history outside the pandemic, at just 3% to $715.1 million, well below the consensus of $751.6 million.
The adtech firm also came up short on the bottom line, reporting adjusted earnings per share of $0.34, down from $0.41 and below estimates of $0.40. CEO Jeff Green acknowledged that the "quarter did not meet the standard we set for ourselves." He pointed to weak spending in key verticals like consumer packaged goods and automotive, though digital advertising leaders like Alphabet, Meta Platforms, and Amazon all delivered strong revenue growth, showing the digital advertising environment remains healthy.
Image source: Getty Images.
What's next for The Trade Desk
The Trade Desk's third-quarter outlook was also disappointing, calling for a sharp sequential decline in revenue to at least $650 million, down 12% from a year ago.
Unsurprisingly, several Wall Street analysts downgraded the stock on the news, noting both macro and internal challenges, and the general sentiment seems to be that any recovery will take time.
Green seems to be trying to persuade investors that an odd combination of industry forces is hurting the company, but that doesn't seem believable. Additionally, The Trade Desk doesn't seem to have any sort of turnaround plan.
If the business is truly on its way to double-digit declines, then it's time for a bigger pivot. As the founder, Green is unlikely to be pushed out, but the company could be on a slow path toward irrelevance without a significant change.
Jeremy Bowman has positions in Amazon, Meta Platforms, and The Trade Desk. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, and The Trade Desk. The Motley Fool has a disclosure policy.