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The Trade Desk Stock: Value Stock or Value Trap — Transcript · YTtoTranscript

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The Trade Desk Stock: Value Stock or Value Trap

Parkev Tatevosian, CFA · 1,386 words · 7 min read · EN-ORIG

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Below is the complete, readable transcript of The Trade Desk Stock: Value Stock or Value Trap by Parkev Tatevosian, CFA on YouTube. Read the full text, copy any part you need, or generate a transcript for any video with our free tool.

The Trade Desk reported quarterly financial results that missed my expectations and Wall Street's expectations and nearly everyone's expectations including the CEO. And of course I'm disappointed with that because I own The Trade Desk stock and I've ranked it as one of the best 11 stocks you could buy right now. Unsurprisingly shares are down over 20%

in the after-market hours following these results. So in this video I'm going to review the figures and let you know what I'm thinking about in terms of The Trade Desk stock ranking and what I'll be doing with my Trade Desk stock, if I'm interested in buying more or if I'm interested in selling my position

following these results. I want to thank The Motley Fool for sponsoring this video. Visit fool.com/parkev for the 10 best stocks to buy now. You can see the price action here. It's down over 21% now, almost 22% in the after-market hours. But the company has been disappointing all year long. It's down over 53% year-to-date in 2026. And

if we look back a full year, it's down over 80%. So we knew this was going to be a bad report just right off the bat from the first sentence from the CEO saying, "This quarter did not meet the standard we set for ourselves." When a quarterly earnings report starts off like this, you know it's going to be

really bad. He [snorts] goes on to say, "But it has reinforced our belief that we are focused on the right opportunities for the future. We have a clear understanding of the factors that impacted our performance and we are taking decisive action to strengthen our execution, upgrade our platform, and sharpen our focus on the areas we can

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create the greatest value." And looking at the actual results, the figures, you can understand why the CEO and founder is disappointed. Revenue increased by just 3% from the same quarter last year to 715 million. I was expecting revenue growth closer to double digits in this recently completed quarter. To make matters worse, the company

actually spent more in certain categories that actually led to their net income margin and net income to drop from 90 million to 64 million in the currently completed quarter. The Trade Desk reminded again that they have a customer retention above 95% during the second quarter as they've had for over a decade. And I've been asking

for management instead of providing the 95% number and just for the most recently completed quarter. I'd like to see a chart of their customer retention ratio over that 10-year period and see the trend line of customer retention. Is it dropping while still above 95%? Is it flat while still above 95%? I want to see the trend line in addition

to the actual number and I haven't seen that figure reported anywhere in The Trade Desk's financial results, not in these earnings reports that I go through every quarter, not in the conference call transcripts which I go through every quarter. And so I want to see these figures reported in these areas. The company did use 78 million dollars

to repurchase its stock and as of June 30th, the company has 269 million available for more repurchases. I would like to see the company more aggressively buy back stock. There was reports of insiders buying shares. I'd like to see more of that given the significant drop in the share price. Looking ahead, it doesn't look much

better. The company's forecasting third quarter revenue of at least 650 million and adjusted EBITDA of 160 million. If we compare that with the September quarter of 2025, the company generated 739 million in revenue in that period. So, from 739 million down to 650 million would be a considerable drop in year-over-year revenue. It would be a

revenue decrease. And as I mentioned, the company didn't cut costs. So, sometimes you're okay with the company's revenue growth decelerating if they also dropped expenses and they dropped investment. And so, understandably, they generate slower revenue growth. But Trade Desk actually increased their total operating expenses and especially in sales and marketing, they increased

their spending to 174.4 million up from 161 million. They did cut spending in general and administrative costs. That's a minimum. I'm glad to see that. You don't want to be increasing the amount of money you're spending on your corporate headquarters or the expense account for senior management. You don't want to be doing

those kinds of things. You don't want to build a new headquarters during this kind of big drop in your share price. But overall, they still increased their overall spending and that led to their operating income to drop from 117 million to 101 million. The share buyback did reduce the share count and I

suspect they will continue buying back stock to reduce the share count. The cash flow from operations still increased for the 6-month period ending June 30th, increasing to 545 million up from 456 million. For the 6-month period ending June 30th, their buyback has dropped. Last year, they spent 647 million buying back stock. This year,

only 241 million when the share price was even lower than it was last year and when they were generating even more cash flow than they did last year. This is a bad sign to me. Either the management is not as confident in the shares as they were last year or they're concerned that

their performance is going to deteriorate and they're going to need the cash to stabilize the business. Overall, this was an awful quarter and a terrible forecast and I'm surprised that the stock is only down 21% following this news. I think partly that's due to the fact that the stock price was already down by so much this year and it

was down by 7% in the normal trading session before the company reported their results and it's down now over 80% year to date. I'm sorry, over the previous year and the valuation is already incredibly cheap. And so for those reasons the stock price didn't react as negatively as normally would happen for this kind of an

underperformance. It's now trading at a forward price to earnings ratio of just 8.1. That's a ridiculously cheap valuation, but now the company is seemingly deserving of an extremely cheap valuation. Their performance is worsening, it's not stabilizing and I'm concerned that the management team doesn't know how to stabilize the business. Maybe the competition is too

much for the management team to handle. So I've mentioned that I've had The Trade Desk ranked as one of the top stocks to buy all year long here in 2026 and these results were so disappointing, they were so much worse than expectations that I'm downgrading Trade Desk stock. I still rank it as a buying

opportunity, but I don't think it's one of the best stocks to buy anymore. What I'll be doing with my shares. So I'm still on track to do as I planned with my shares. If you remember, I bought my Trade Desk stock in a few tranches with the first tranche being at about $43 per

share. And I mentioned I added to that position. And so, a little bit later this year, I'll probably sell that group of shares that I bought at around $43 to capitalize on the tax loss for tax loss harvesting. The rest of my position I'll likely keep until the end of this year, uh probably until the start of next

year. I want to have at least 12 months of ownership of those shares. And then I'll make a decision at that point in time what to do. I'm not interested in adding any more to my Trade Desk stock position until I see some stabilization in the business. I haven't gone through the conference

call transcript yet, so I want to go through those. Um but there isn't going to be anything in there that shows stabilization of the business. That needs to come over time. The company needs to stabilize the revenue, uh return to growth, return to near double-digit growth, or demonstrate significant improvement in profitability at these lower levels.