Trade Desk Stock Is Too Expensive, Wait for Correction

Trade Desk stock price is down significantly from its all-time high of $970 amid investors profit taking strategy. Despite that, the shares of the digital advertising technology company look significantly overvalued due to the rally of 186% in the last twelve months, pushing the price to earnings ratio to 174 times.

The investors haven’t also reacted to stronger-than-expected results for the December quarter. Its fourth-quarter revenue of $319 million increased 48% year over year and topped the Wall Street consensus estimate by $27 million.

Co-Founder and CEO of The Trade Desk, Jeff Green said.

We won more share in our fastest-growing channels such as CTV and Audio, which helped drive record ad spend of $4.2 billion on our platform in 2020. Perhaps just as important, in 2020 we saw several years of advertising disruption and innovation compressed into a few months. Marketers are being more deliberate and data-driven in everything they do, and as a result, they are gravitating to the advertising opportunities of the open internet.”

Sluggish First Quarter Outlook Impacted Trade Desk Stock

Trade Desk stock price fell almost 2% after the company announced first-quarter revenue guidance in the range of $214 million and $217 million, down significantly from the previous quarter’s revenue of $319 million. The company blames the COVID-19 pandemic for a lower revenue outlook. The company expects an adjusted EBITDA of around $55 million for Q1 compared to $155 million in the previous quarter.

Trade Desk stock price is likely to see a big price correction in the days to come because its valuations and financial numbers are not supporting share price gains. Thus, investors should wait for a better entry point.