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

Morgan Stanley has revised its investment rating for The Trade Desk (TTD.US) from "overweight" to "equal weight," reflecting heightened concerns about the company's growth outlook. The firm acknowledged that ongoing execution challenges, a sluggish open internet advertising market, and intensifying competition have led to an underestimation of the obstacles facing the advertising technology company.

The firm's report underscored that The Trade Desk's guidance for a 14% year-over-year revenue growth in the third quarter fell short of market expectations. This has reignited doubts that surfaced when the company's fourth-quarter 2024 performance missed estimates, suggesting ongoing challenges ahead. The analysts noted that The Trade Desk's latest results highlight the increasing uncertainty the company faces amid competitive and structural pressures. Factors contributing to this uncertainty include rising advertiser pushback, Amazon's accelerated 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 connected TV (CTV) segment, which is exposed to the weak open internet advertising market.

Morgan Stanley believes that fundamental uncertainties, a challenging year-over-year comparison in 2026, and headwinds in the open internet advertising market limit The Trade Desk's upside potential, making the risk-reward profile more balanced. The firm has lowered its price target for The Trade Desk from 80 dollars to 50 dollars, indicating a potential downside of nearly 4% from the current price.