Why Shares of The Trade Desk Dropped 21.5% In February
Key Points
The Trade Desk posted another disappointing earnings result in February.
The company is facing competition from Amazon and potential disruption from AI.
Founder Jeff Green recently bought over $100 million shares in the open market.
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Shares of The Trade Desk (NASDAQ: TTD) slumped 21.5% in February, according to data from S&P Global Market Intelligence. An advertising technology platform, The Trade Desk's revenue growth is slowing down considerably among competition from walled gardens and Amazon, which has shareholders panicking. The stock is down 78% from its highs, even after rebounding in early March after reports of a partnership with OpenAI.
Here's why The Trade Desk was falling yet again in February, and whether now is the best time to buy the dip on this fallen angel.
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Slowing revenue growth and increased competition
In late February, The Trade Desk reported fourth-quarter 2025 results and provided guidance for 2026. Revenue growth slowed again, hitting just 14% in the period, and net income margins declined. Guidance for the current quarter in 2026 calls for an even further slowdown to 10% growth.
The Trade Desk is facing increased competition from walled garden advertisers such as Alphabet, as well as direct advertising technology competition in connected TVs from Amazon. What's more, there is a narrative that artificial intelligence (AI) may disrupt the entire ad-buying process on the internet, sending investors panicking over their Trade Desk shares.
Before this massive drawdown, The Trade Desk traded at a premium valuation, with a price-to-earnings ratio (P/E) well over 100. Now, it trades at an earnings ratio of 33.6, which is much cheaper but still above the S&P 500 Index average.
Image source: Getty Images.
Time to buy the dip?
The Trade Desk stock bottomed around $20 at the end of February, but has since shot back up to $30. This is due to a reported partnership for advertising through OpenAI's popular ChatGPT ecosystem, which could prove lucrative for The Trade Desk. On March 4th, it was reported that founder and CEO Jeff Green had been making massive insider purchases of his company's stock, totalling $148 million. This is a huge vote of confidence for the business right now.
Still, The Trade Desk faces major competition from large technology giants in advertising, and does not trade at an extremely cheap earnings ratio even after this massive drawdown. An investor may have confidence in durable revenue growth and margin expansion for the business in the coming years, which could lead to nice share price appreciation. However, this is not a slam-dunk scenario where you buy the dip. Do not think an investment in The Trade Desk stock today comes without risk.
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Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, and The Trade Desk. The Motley Fool has a disclosure policy.
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