Morgan Stanley Downgrades The Trade Desk, Cites 14% Revenue Growth Miss

Morgan Stanley has revised its investment rating for The Trade Desk (TTD.US) from "overweight" to "equal weight," expressing heightened concerns about the company's growth outlook. The investment bank cited several adverse factors that have amplified its worries about The Trade Desk's connected TV (CTV) business. These factors include ongoing execution issues, a sluggish open internet advertising market, and intensifying competition. Morgan Stanley admitted that its previous evaluation of the company's growth resilience was flawed given these challenges.

The investment bank noted in its report that The Trade Desk's guidance for a 14% revenue growth in the third quarter fell short of market expectations. This has reignited doubts that emerged when the company's fourth-quarter performance for 2024 missed estimates, suggesting that future challenges may persist. The analysts also highlighted that The Trade Desk's latest results underscore the increasing uncertainty the company faces due to competition and structural pressures. They identified several key factors, including rising advertiser resistance, Amazon's faster-than-expected expansion of its demand-side platform (DSP) through new deals with Roku and Disney, and the risks associated with the company's gross billings (excluding the CTV segment), which are exposed to the weak open internet advertising market.

Morgan Stanley believes that fundamental uncertainties, a challenging year-over-year comparison in 2026, and the headwinds in the open internet advertising market limit The Trade Desk's stock price upside. The bank has reduced its target price for The Trade Desk from $80 to $50, indicating a potential downside of nearly 4% from the current price. The bank's assessment suggests that the risks and returns for The Trade Desk are now balanced, reflecting a more cautious outlook on the company's future performance.