Why Is The Trade Desk Stock Crashing, and is it a Generational Buying Opportunity? | TTD Stock

SUMMARY

Parkev Tatevosian, CFA, analyzes The Trade Desk's recent earnings miss, highlighting significant revenue deceleration and deteriorating profitability. He discusses the company's outlook, management actions, and his revised investment stance on the stock.

MAIN POINTS

• The Trade Desk reported quarterly financial results that missed expectations, leading to a more than 20% drop in share price after hours. [0:00]
• Revenue grew only 3% year-over-year to $715 million, with net income falling from $90 million to $64 million, and customer retention remained above 95%. [2:03]
• The company repurchased $78 million in stock and has $269 million available for further buybacks, but forecasts a significant revenue decline for the next quarter. [3:00]
• Operating expenses increased, particularly in sales and marketing, causing operating income to drop and buybacks to decrease compared to last year despite higher cash flow. [5:01]
• The stock now trades at a forward P/E of 8.1, reflecting market skepticism as performance worsens and management's ability to stabilize the business is questioned. [6:00]
• Tatevosian plans to sell part of his position for tax loss harvesting and will not add to his holdings until the business shows signs of stabilization or improved profitability. [8:01]

DETAILED ANALYSIS

The Trade Desk's latest quarterly results have triggered a sharp decline in its stock price, with shares falling over 20% in after-hours trading and more than 53% year-to-date in 2026. The company's revenue increased by just 3% compared to the same quarter last year, reaching $715 million, which fell short of both analyst and internal expectations. Net income also declined substantially from $90 million to $64 million, reflecting higher spending in certain categories, particularly sales and marketing, which rose to $174.4 million from $161 million.

While the company maintains a customer retention rate above 95%, there is a lack of transparency regarding the trend of this metric over time, raising questions about the sustainability of its client base.

Despite the disappointing results, The Trade Desk continued its share repurchase program, using $78 million for buybacks in the quarter and retaining $269 million for future repurchases. However, the scale of buybacks has decreased compared to the previous year, even as the share price has dropped and cash flow from operations has increased to $545 million for the six months ending June 30th. This reduction in buybacks may indicate management's caution regarding future performance or a need to preserve liquidity.

Looking ahead, the company forecasts third-quarter revenue of at least $650 million, a significant drop from $739 million in the same period last year, alongside an adjusted EBITDA projection of $160 million. The lack of cost-cutting measures, aside from a modest reduction in general and administrative expenses, has contributed to a decline in operating income from $117 million to $101 million. The stock's forward price-to-earnings ratio has compressed to 8.1, reflecting diminished investor confidence and the market's view that the company now merits a lower valuation due to deteriorating fundamentals.

Given the severity of the earnings miss and the weak outlook, Parkev Tatevosian has downgraded The Trade Desk from one of his top stock picks, though he still considers it a buying opportunity at current valuations. He plans to sell a portion of his holdings for tax loss harvesting while retaining the remainder until at least the end of the year, pending signs of stabilization in revenue growth or profitability. The company faces ongoing challenges, including competitive pressures and questions about management's ability to restore growth and improve margins.

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