Is The Trade Desk Set for a Comeback After Recent Selloff?

Shares of The Trade Desk, Inc. TTD have shown little action this Friday, following a sharp selloff of over 30% the previous day.

However, signs indicate that the stock might be due for a rebound, making it our Stock of the Day.

The sharp decline stemmed from disappointing guidance, prompting many frustrated investors to abandon their shares. The volume surged, with approximately 55 million shares changing hands, which is around ten times the average for the stock. This spike in trading could signal a capitulation, potentially setting the stage for an upward movement.

Despite the initial concerns, The Trade Desk’s earnings may not be as bleak as predicted.

Operating margin, an important metric for efficiency, stood at 16% for Q4 2023, meaning the company earned 16 cents for every dollar of sales. In contrast, the margin for Q4 2024 improved to 25%, indicating a significant uptick in efficiency as they now keep 25 cents of revenue on each dollar sold.

The earnings report showed considerable growth as well: Q4 earnings reached 36 cents, compared to just 19 cents the prior year.

If it turns out that the selloff was an overreaction, buyers may step back into the market. However, with many sellers having given up, prospective buyers may struggle to find available shares. This scarcity could lead them to pay higher prices, potentially driving the stock upward.

Additionally, The Trade Desk is nearing a key support level. Historical data reveals that since March of last year, rallies have consistently occurred when the stock approaches the $67.50 mark.

When stocks approach support levels, investors often engage in bidding wars, which can trigger a snowball effect and lead to price increases.

The combination of potentially improving earnings and a possible capitulation could indicate that The Trade Desk’s stock is poised for a comeback.

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