In a market plagued by the coronavirus, is it time to give The Trade Desk (NASDAQ:TTD) a serious look? Let’s examine the business of the market and TTD stock, off and on the price chart, to reach a buy, sell or hold-off decision on shares. Let me explain.
It’s no surprise The Trade Desk has taken an abnormally large hit during the market’s COVID-19 driven correction. The $10.4 billion company is growing fast. The combination of outsized growth and larger, though not Microsoft (NASDAQ:MSFT) or Apple (NASDAQ:AAPL) tier capitalization, adds up to more significant volatility. And in a down market this typically spells a larger decline in share price for a company like The Trade Desk.
The coronavirus sell-off hasn’t been an exception to this kind of undesirable price volatility. With the S&P 500 down 20.6% from February’s all-time-high at Tuesday’s absolute market low and as of Wednesday night’s close, TTD stock has been slammed by nearly 35%. And now it’s about to get worse for the market and The Trade Desk.
Following news during Wednesday’s trading session the World Health Organization has declared the COVID-19 outbreak a pandemic, the US government announced its decision to halt all airline travel with continental Europe overnight. Futures are indicated solidly lower and sufficient to send the S&P 500 firmly into a bear market. At the same time TTD is poised to drop another 11%.
If investors are asking themselves if conditions could possibly get any worse, the answer may very well be ‘yes.’ The Trade Desk faces another issue that’s helping unravel shares. The company’s bread and butter is an AI and big-data-driven DSP or demand-side platform for digital advertisers.
So, why is this bad? In an uncertain environment and global economy that feels like its wheels and wings are falling off, marketing budgets could be among the first sacrificial lambs to go if conditions really worsen. And as some TTD shareholders have quickly learned, Wall Street sometimes likes to shoot first.
To be clear, The Trade Desk isn’t in the same boat as a company such as Royal Caribbean (NYSE:RCL). Still, investors interested in shares should brace for superior sales and profit growth to take a hit in the short-term. Longer-term? The company’s 5-year growth rate forecast of 31% is probably not far off-the-mark.
TTD Stock Price Weekly Chart
Source: Charts by TradingView
Maybe the better news for this market upstart is its hard-hit share price? The fact is The Trade Desk is testing key price and pattern support. As of Wednesday’s close TTD stock ‘was’ challenging its lifetime 38% Fibonacci level and channel line.
The technical duo represent the top layer within a wide zone support that spans from approximately $138.50 – $210 in The Trade Desk. The one big blemish with shares finding a bottom is an non-supportive weekly stochastics. The indicator recently signaled a bearish crossover and turning lower inside neutral territory. Now and as mentioned earlier, shares of The Trade Desk are indicated to open firmly lower inside this support band near $197.
For investors interested in purchasing The Trade Desk, I’d suggest waiting. Shares demand having the broader market at your back before a buy decision is made. A market-based follow-through day which I’ve advocated investors watch for in recent days is a sure sign of a turn-for-the-better.
Bottom-line, declines of 30% are typical for a stock of TTD’s caliber in healthy markets. Worse and in less-fit environments which we are faced with, common but large corrections can get significantly bigger. And as we’re about to see today, Wednesday’s 35% corrective low in The Trade Desk is far from finished business.
Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies, related musings or to ask a question, you can find and follow Chris on Twitter @Options_CAT and StockTwits.
