The Trade Desk (TTD) offers a compelling growth story: should you accumulate?

A loss of nearly 10% YTD for Trade Desk Inc. (NASDAQ:TTD) stock will obviously be a talking point. That is despite a meagre average loss of less than 1% for its tech peers in the Nasdaq composite.

However, the Trade Desk’s performance over the year is impressive at over 35%, compared to Nasdaq’s 10% loss. Our preliminary analysis shows Trade Desk may continue to bleed, but the downtrend won’t last long. In the longer term, TTD is attractive and one of the best growth stocks in 2024. 

In terms of valuation, Trade Desk is statistically overvalued, with a PEG ratio of 1.99 on Zacks Rank. The ratio is consistent with the industry average of 1.99, meaning the Trade Desk is priced at peer levels. However, the valuation does not tell a complete story of the growth stock.

A big part of the reason for the recent declines in Trade Desk is market sentiment since its Q3 results. The company reported a 25% year-over-year revenue growth to $493(£389) million and a 27% surge in EPS. The results were comfortably higher than analysts' estimates. However, the stock suffered a weak performance after a disappointing outlook.

In Q4, Trade Desk expects revenues of $580(£458) million, short of the $610.4(£482) million estimates. In a conference call to investors, Trade Desk noted the impact of the Hollywood and auto strikes on ad revenues. Of course, the impact will be felt in subsequent quarterly results. 

Certainly, the Trade Desk stock is reeling from the effects of high investor optimism. What is clear is that the company continues to generate growing revenues. Trade Desk also continues to take market share from its big brothers, Meta and Alphabet, in digital ads. The key to the growth has been its programmatic advertising system that uses AI to simplify ad buying. 

More so, the strikes, which were the elephant in the room for the lacklustre performance, have subsided. It is, thus, a matter of time before the stock starts to perform. When the Trade Desk reports Q4 earnings on February 21, the results will be keenly watched. Optimism is building that the performance would surprise, with TipRank estimates assigning a strong buy. 

TTD technical analysis – selling weakness at the 200-day MA

The odds are against Trade Desk stock from a technical investing point of view. The stock is under selling pressure after recently crashing below the 50-day MA. Pressure is mounting at the 200-day MA, with indications it could crash below. A break below $63 could see the stock eye a new low towards the $56 level.

Should you buy Trade Desk stock?

While TTD is a fundamentally good stock, recent weakness may continue ahead of Q4 results. We consider the recent selling a market reaction to weak guidance, not company fundamentals. However, the selling could continue based on the technical outlook. Investors should consider buying TTD at a lower level and follow its Q4 results.