Famed investor Jim Cramer says “there are wins and misses” in digital advertising and marketing automation space – and Trade Desk (TTD) is evidently the latter.
His comments came after The Trade Desk reported first-quarter results showing a 12% increase in revenue to $689 million.
However, the revenue growth was largely overshadowed by a weaker-than-expected earnings performance, with earnings per share coming in at $0.08.
Including the post-earnings dip, Trade Desk stock is down some 45% versus its year-to-date high.
A major red flag on Trade Desk stock
More than the Q1 numbers, Cramer favours caution on TTD stock because CEO Jeff Green loaded up on $148 million worth of it recently “with a stop between $23.49 and $25.08”.
But the multinational is going for $22.22 at the time of writing (well below Green’s entry point) – even though its board authorized a $350 million buyback plan as well on Friday.
The fact that none of that has been able to put a floor beneath Trade Desk is a “major red flag” for disciplined investors, he said in a segment of CNBC today.
Note that TTD now sits firmly below its major moving averages (MAs) – with an RSI in the early 40s indicating significant room for further declines before the stock hits “oversold” territory.
TTD shares are up against the big fish
According to Jim Cramer, the problem with Trade Desk shares is that they’re up against the giants of the industry.
On the retail front, this Ventura-headquartered firm is competing with behemoths like Walmart and Amazon – and in ad-tech, it’s up against the likes of Google and Meta Platforms.
By mentioning these “powerful opponents,” the Mad Money host basically suggested that TTD is finding it difficult to retain its competitive edge or “moat” in the current environment.
All in all, Trade Desk “was a one-time high flyer” whose best growth days are likely behind it, he concluded.
William Blair downgrades Trade Desk Inc
William Blair senior analyst Ralph Schackart echoed a similar sentiment, downgrading TTD shares in a research note this morning to “market perform”.
According to him, recent surveys indicate the company is losing ground to “walled gardens” like Google and Amazon.
Moreover, the new Kokai AI platform has higher-than-expected costs, which are making it difficult to negotiate with ad agencies and clients.
This is why growth is decelerating from historical 20%+ levels to single digits, he concluded.
How to play TTD after Q1 earnings
Trade Desk Inc doesn’t currently pay a dividend to incentivize ownership despite these challenges.
Heading into the Q1 print, Wall Street analysts had a consensus “moderate buy” rating on TTD – with a mean price target of about $30.
However, it’s reasonable to expect downward revisions now that management has offered guidance for $750 million in revenue, well below the $772 million consensus.
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