Dr J Rould
Full-Time Tech Investor, Quantum/Cybersecurity, Philosophy Background
Amazon is eating the advertising lunch of both The Trade Desk and AppLovin. The Trade Desk fell 20% after a massive earnings miss and another 15% the next day, with no recovery in sight, while AppLovin has dropped as well. x.com x.comÂ
AppLovin's ad yield engine has run out of gas, setting up the same structural decay that hit The Trade Desk as ad spend consolidates into walled gardens. Conversion rates stalling around 1.4%, delayed AI rollouts and mounting litigation point to a fundamental tailspin that Piper Sandler's cautious call understates. Being down 60% this year is not a bottom; buying here is catching a falling knife on a broken narrative. x.comÂ
The Trade Desk's neutrality remains an advantage over Amazon and Google, which both sell inventory and help decide where advertisers spend. Many brands, especially those competing with Amazon, don't trust it with their customer data, clean room or not. Retention above 95% for over a decade argues against claims that Trade Desk delivers worse return on ad spend, though that debate will be settled in time. x.com x.com x.comÂ
Alphabet's core Search growth is slowing while AI spending surges, making the selloff look deserved despite fast Cloud growth. Search growth fell from 19% to 17% to 12% over three quarters; Search now represents just under half of revenue. The stock could fall to $250, though Amazon is the preferred buy. x.com x.com x.com x.com x.comÂ
The Trade Desk has shown many red flags, and a huge Q2 miss confirmed them. Revenue of $715M missed the $751M estimate, adjusted EPS fell 17%, and Q3 guidance of at least $650M revenue and about $160M EBITDA was far below estimates of $805M and $341M, per @wallstengine. It bought back $78M of stock while heading for that miss. Unlike AppLovin, it has not been very profitable for years, with heavy dilution and stock-based pay, slower growth and smaller scale. x.com x.com x.comÂ
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.comÂ
The Trade Desk's story broke when its CEO said it wasn't competing with Amazon because it was the open internet, a clear sign of denial. Advertisers spend for return on investment and care about little else. x.comÂ
AWS's near-40% growth and agents' limited adoption make negative pre-earnings sentiment toward Amazon look misplaced. AWS was expected to have one of its best quarters and reported $184B ARR, up 39.3%, close to the projected $185B and 40%. Agents remain far from mainstream, so agentic e-commerce disruption was not expected to show up this quarter. x.com x.com x.comÂ
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.comÂ
The Trade Desk is the worst stock ever seen, now down 50% since CEO Jeff Green bought $150 million of shares a few months ago, a purchase that is hard to square with the numbers he saw. Amazon's growing ads business is a big part of the damage. x.com x.comÂ