Investing.com -- The Trade Desk (NASDAQ:TTD) has lost its "premium edge", according to Evercore ISI, which downgraded the stock from Outperform to In Line following disappointing fourth-quarter earnings.
The firm also slashed its price target for the stock to $90 from $135 and cut its 2025 EBITDA estimate by 11%.
TTD shares have plunged 29% in premarket trading after the company missed its earnings guidance for the first time in 33 quarters, Evercore ISI noted.
“What a track record!” the analysts wrote, emphasizing that The Trade Desk’s historical consistency had been a key reason for its premium valuation.
However, a "fundamental correction" is now in play. “TTD’s revenue growth has gone from Premium (low-to-mid 20s%) to sub-Premium (high-teens-20%) for likely several fundamental reasons, and this has major valuation implications,” Evercore ISI stated.
The firm now sees TTD as a “trading-range bound stock at best for the foreseeable future.”
Evercore ISI also identified three key reasons behind the slowdown. Firstly, mis-execution. They state that the rollout of Kokai, The Trade Desk’s latest ad-tech platform, has been slower than expected, while a major reorganization in Q4 disrupted operations.
Secondly, Evercore says the company’s dual relationships with agencies and brands could be creating conflicts. They also believe TTD faces rising competition from Amazon (NASDAQ:AMZN) Prime Video, Netflix (NASDAQ:NFLX), and other platforms, which are attracting material brand advertising dollars.
While Evercore ISI acknowledged these challenges are "addressable," the firm believes it will take time to resolve them. "We may be wrong in our fundamental attribution, but this is our best guess as of now," the analysts wrote.
Despite the downgrade, Evercore ISI hinted that a long-term buying opportunity could emerge in the next 12-18 months.