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Investing.com - BofA Securities downgraded The Trade Desk (NASDAQ:TTD) stock rating from Buy to Underperform on Friday, slashing its price target to $55.00 from $130.00. The company, currently valued at $26.87 billion, has maintained strong revenue growth of 25% over the last twelve months with an impressive 80% gross profit margin.
The downgrade follows The Trade Desk’s first-ever guidance miss as a public company during its fourth quarter 2024 results, raising questions about competitive pressures and the company’s ability to maintain its 20%+ long-term growth trajectory.
BofA Securities noted that while some investors had attributed the previous miss to execution issues related to the Kokai rollout, the company’s third-quarter outlook now indicates a deceleration in underlying growth, making it difficult to dismiss these concerns as isolated incidents.
The investment bank highlighted the contrast between The Trade Desk’s performance and the robust advertising growth being reported by many large walled garden competitors, suggesting deeper competitive challenges for the ad tech company.
While BofA Securities still believes The Trade Desk can achieve double-digit revenue growth, it no longer justifies the premium valuation multiple the stock has historically commanded, reducing its valuation multiple to 20x from 45x on lowered CY26E adjusted EBITDA estimates. Despite maintaining a "GREAT" financial health score according to InvestingPro’s comprehensive analysis, the stock appears overvalued based on InvestingPro’s Fair Value model.
In other recent news, The Trade Desk reported a revenue growth of 19% in its most recent quarter, surpassing prior guidance and Street expectations. However, the company’s management has indicated a potential slowdown in the upcoming quarter, with projections of 14% reported growth and 18% excluding political influences. RBC Capital adjusted its price target for The Trade Desk to $90, maintaining an Outperform rating, citing "solid results" that did not meet elevated investor expectations. Guggenheim also revised its price target to $75, while keeping a Buy rating, reflecting concerns over the anticipated growth deceleration.
TD Cowen, on the other hand, raised its price target to $259, maintaining a Buy rating, following a quarter that exceeded expectations with bookings significantly above guidance. MoffettNathanson downgraded The Trade Desk from Neutral to Sell, lowering the price target to $45 due to concerns about the company’s valuation and rising threats. Raymond (NSE:RYMD) James reiterated its Market Perform rating after the company’s mixed second-quarter results, which beat consensus estimates but fell short of higher buy-side expectations. The firm’s third-quarter guidance also did not meet investor hopes, indicating seasonal softness and continued revenue deceleration.
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