Late Stage Capitalism
Physician, Long-Term Stock Investor with 30 Years of Experience
The Trade Desk looks like a falling knife after a quarter that broke its growth story, though a turnaround remains possible. Per an earnings recap, Q2 revenue of $715M missed its own $750M guidance as growth slowed to 3%, Q3 guidance of at least $650M implies a 12% YoY decline, and an executive exodus followed. A drop toward $11 would make it worth reconsidering. x.com
The Trade Desk's plan to cut about 15% of its workforce signals that it does not see a quick turnaround, so a failing company rising on the news is the opposite of what should happen. Cutting costs as the only option points to more than a temporary issue. Per Wall St Engine, the restructuring shifts resources to priority growth areas and brings $39-51 million in cash charges, mainly severance. x.com
The Trade Desk's deceleration is structural, not macro, as its Q3 guidance shows. Per @StockSavvyShay, Q2 revenue was $715M against $752M expected, a miss that could be shrugged off, but Q3 revenue guidance of $650M fell far short of the Street's $808M, with EBITDA guided to $160M against $343M. The 21% drop is the market finally believing the company. x.com
The Trade Desk's financial trends keep imploding, with its revenue guide 20% worse than already beaten-down expectations. Its founder and CEO's optimism about the future does not change that. x.com
The Trade Desk is basically priced for bankruptcy, so a strong mean-reversion move could come soon. x.com
The Trade Desk is not a buy even at $13 because founder Jeff Green, who still runs the company, no longer earns trust. Management made promises it failed to deliver, and Green replaced nearly the entire team in the past year, a major red flag that raises the question of whether he, not the ousted managers, is the real problem. Fundamentals point to disruption: revenue growth fell from 28% to 3%, gross margin from 82% to 74%, and operating income is shrinking fast. x.com x.com
The Trade Desk is a deflating, Ponzi-like former high flyer, with revenue growth slowing every quarter while costs explode. Growth decelerated from 25% to 19%, 18%, 14% and 12% over the past year, and the Q2 guide implies just 8%. The stock traded at 30x revenue only 18 months ago. x.com
The Trade Desk's short-term upside from ChatGPT monetization is undervalued as OpenAI moves to ads. At $22, down from $139, it is priced for distress or disruption even though the business seems to be doing okay, leaving perhaps 40-50% upside back to the low $30s on mean reversion. Conviction is not high. x.com x.com
The Trade Desk could fall to $7.27 without any bankruptcy, simply through a continued decline in earnings. x.com
The Trade Desk is not cheap just because it is down 70%, since its business is deteriorating. Growth has slowed and margins have weakened for a couple of years, so a 70x forward multiple compressing toward 12–20x reflects lower expected growth, not a bargain. The market rewards earnings growth, revenue growth and improving cash flow, and dip buyers driven by recency bias are missing that. x.com x.com
The Trade Desk is more attractive as a recovery play at 16x earnings than it was at twice the price. The stock was over 30x earnings as recently as March and only became cheap very recently. Whether the company is broken remains an open question; what is clear is that sentiment is worse than a few months ago. x.com
The Trade Desk's management credibility, Jeff Green's in particular since the rest of the team is new, is now really doubtful. A big revenue miss came on guidance that had already been cut dramatically, and another weak guide followed, so the quarter looks awful on first impression. x.com
