Why The Trade Desk Fell Again Today

Shares of programmatic advertising software company The Trade Desk (NASDAQ: TTD) were falling again today, down 6% as of 12:49 p.m. EDT.

The Trade Desk stock has been on a wild ride as of late, mostly to the negative. Yesterday, the company received bad news after an industry publication reported that a major advertising agency told clients to avoid the Trade Desk platform. Today, two Wall Street analysts lowered their price targets on the stock as a result.

Publicis throws The Trade Desk under the bus

Yesterday, advertising industry publication Ad Age reported that French advertising firm Publicis Group (OTC: PUBGY) had recently instructed clients to avoid using The Trade Desk's demand-side advertising software. According to the report, a Publicis-funded third-party audit found that the Trade Desk had violated its agreement by overcharging and enrolling clients in additional features without their consent.

This bit of news sent The Trade Desk's shares down yesterday, even though neither Publicis nor The Trade Desk confirmed the report. Publicis did not answer a request for comment, and The Trade Desk issued a statement, saying, "We're aware of questions related to a Publicis audit process. Any notion that TTD ⁠failed an audit is not true."

Still, the denials didn't prevent sell-side analysts from downgrading shares and lowering target prices today. Analysts at Stifel lowered their rating on TTD shares from "Buy" to "Hold," and lowered the firm's price target to $26 from $48. Stifel analysts noted that Publicis is The Trade Desk's largest client, accounting for over 10% of gross billings.

Additionally, sell-side research firm Rosenblatt also downgraded shares to "Hold" and lowered its price target to $25. Rosenblatt noted that the Publicis accusation could be emblematic of ad agencies taking a more confrontational approach to the Trade Desk, as the agencies themselves come under financial pressure.

Image source: Getty Images.

The Trade Desk remains in limbo

The Trade Desk's stock is down sharply over the past year and its multiple has contracted to reasonable levels, potentially creating an opportunity for investors. In fact, earlier this month, the stock surged on reports that AI leader OpenAI might be testing advertising strategies with The Trade Desk.

However, it appears AI adoption may be hurting The Trade Desk's traditional customers as much as it's helping it find new ones. Amid this industry flux, it's no wonder the adtech's stock has become volatile, and its once-sky-high multiple has contracted amid the uncertainty.

Billy Duberstein and/or his clients have positions in The Trade Desk. The Motley Fool has positions in and recommends The Trade Desk. The Motley Fool has a disclosure policy.