The Trade Desk Inc. (TTD, Financial) saw a significant movement in its stock price recently, dropping by 3.06% to $65.53. The decline appears related to the company's recent earnings report, which did not meet market expectations.
In the fourth quarter of 2024, The Trade Desk reported a 22% increase in revenue, amounting to $741 million, and a 44% rise in adjusted earnings per share to $0.59. Despite this, the results did not align with earlier company guidance and analysts' projections. Wall Street had anticipated revenues of at least $756 million and an EBITDA nearing $363 million, while the actual EBITDA reported was $350 million with consensus expectations at $759 million in revenue.
For the upcoming first quarter, The Trade Desk has provided revenue guidance showing a growth of 17% year-over-year, which is notably slower than the 28% growth reported during the same quarter last year.
Following the earnings announcement, TTD's stock experienced a steep decline, closing 33% lower the day after the release and continued to face downward pressure throughout February.
CEO Jeff Green responded to the situation by acknowledging the unrealistic guidance and outlined corrective measures. These include reorganizing the sales team, improving operational processes, and restructuring product development into about 100 smaller teams to enhance agility in the evolving ad-tech market.
Analyzing TTD's current stock data, the company's market cap stands at $32.5 billion with a price-to-earnings (P/E) ratio of 84.01, which indicates a high valuation relative to its earnings. The stock's price-to-book (PB) ratio is 11.01, close to its two-year low, potentially suggesting undervaluation compared to historical levels. Additionally, The Trade Desk has a strong Altman Z-score of 7.56, implying robust financial health.
Furthermore, The Trade Desk is flagged with a GF Value indicating it is significantly undervalued with a GF Value estimate of $132.15, which is significantly higher than the current stock price. This represents an opportunity for investors looking for growth potential.
Despite some negative aspects such as insider selling and a declining operating margin, positive indicators include predictable revenue and earnings growth, along with a solid interest coverage ratio demonstrating the company's capacity to manage its debt.
