TTD is undervalued (fair value $31 vs current $15) warranting a buy rating, though conviction is lowered to medium due to competitive threats and slowing growth.

The Trade Desk announced revenue growth of only 3% in the last quarter, reaching $715 million. This was a significant slowdown compared to the company's multi-year history of achieving double-digit revenue growth.

Furthermore, management expects the situation to worsen, forecasting that revenues in the third quarter will only reach $650 million . To make matters worse, the management team stated that it is losing a clear vision of future sales in the coming quarters, as it seems to me that customers are hesitant to enter into agreements with "The Trade Desk".

and Amazon or its competitors are one of the main reasons behind The Trade Desk's slowing revenue growth and the distancing of its investor base.

But does all this justify selling shares of "The Trade Desk" , or is it an opportunity to buy when the price is low? We can observe the slowdown in the growth of "The Trade Desk's" revenues if we look at the graph that covers the past decade.

If you look at the newer part of this graph here, in this area, you can see the growth trend flattening out noticeably.

This comes after years of excellent growth for the company, with revenues rising from around $200 million in 2017 to more than $2.9 billion in the last twelve months.

The Trade Desk works with the buyer side in the field of advertising. It helps buyers streamline the purchasing process software-based, reducing the time invested in this process and helping to improve the return on advertising spending.

She is not just looking to help buyers purchase the cheapest available ads. Rather, it helps buyers maximize the effectiveness of every dollar they spend on advertising.

This is the argument they failed to convince investors of. which is close to 15 to 20%, while Amazon now offers its ads at fees ranging from 1 to 5%.

The Trade Desk management team told investors: "Look, this is not a fair comparison between two identical things." Amazon has a lot of advertising inventory, so they can charge you less for the total purchase, but they profit from the inventory they sell to you because it is their own inventory.

They are incentivized to sell their own stock, so it is a lower-quality purchase, but you pay a lower fee.

Investors are watching revenue growth slow considerably, so they are skeptical that The Trade Desk has a convincing argument here. So, since these developments began almost a year ago and The Trade Desk's stock price collapsed, it has fallen by more than 80% since these developments were announced.

I argued that this was a negative thing for "The Trade Desk" and its business. I argued that the company's ability to impose purchase fees ranging from 15 to 20% would be under threat.

That may not be the case ; they may have a better product. They may be working more effectively on behalf of the buyers. However, Amazon's entry at a low price point will affect The Trade Desk's ability to impose those fees.

They may have to reduce the fees they charge, which will reduce revenue, reduce profitability, and reduce competitive advantage.

But the good news is that the changes and restructuring undertaken by The Trade Desk in late 2022 led to a turning point in profitability. For years, the company’s operating profit margin declined from 2017 to 2023, with its operating margins dropping from 30% to a negative level.

But since restructuring and shifting the business focus towards more profitable growth, their operating margins have accelerated from a flat or slightly negative level to over 20%, and remain around those levels at 19.6%.

Their operating margins have not declined as dramatically as their revenue growth rate, although I wouldn't be surprised if their profit margins met a similar fate of sharp decline if they didn't accelerate revenue growth.

A similar story applies to their returns on invested capital. It had been declining for years, but since those restructuring efforts, its return on invested capital has improved to 13.7%, and recently, in light of these recent developments, management has become more focused on its core capabilities.

It is pushing for more focused investments and is really narrowing its vision .

That's something we all do, isn't it? Whenever we face a difficult and stressful situation, we exclude anything outside the scope of our urgent needs, and we avoid those uncertain endeavors.

We focus on the core, we focus on protecting our competitive advantages, and we focus on achieving results in our core categories. We are not focused on expanding into new categories, nor are we focused on doing things that may or may not succeed.

We are really focused on protecting the core, and that is what management has been doing here lately, reinforcing the focus on the core, and focusing on the value it offers to its customers, and that should be positive in the near term in reducing waste and defending itself against this new threat.

So, in addition to the significant slowdown in revenue growth, one thing I was slightly disappointed with from management was the limited share buybacks. Isn't that so? Looking at the valuation, The Trade Desk is currently trading at a forward P/E ratio of just 14.6.

This is the lowest price at which the stock has ever traded.

In the last quarter ended, the management team repurchased $78 million worth of shares. This compares to $136 million in free cash flow and $1.5 billion in debt-free cash on the balance sheet.

Therefore, they have a large financial capacity to repurchase shares. I would like to see, in this current quarter, when they announce their upcoming results, a significant increase in share buybacks to demonstrate their confidence to investors in their ability to cope with the threats they face.

If you are truly confident in your ability to withstand this threat, you will repurchase a lot of stocks here at these relatively cheap levels, which are historically cheap levels.

But I also wouldn't be surprised if they took a more cautious approach, because how can you be so confident when you're facing a giant like Amazon, right ? Imagine you are facing off against Amazon in a competitive business environment .

Therefore, based on these recent developments, one of the key adjustments I have made to my assessment of The Trade Desk is an increase in the risk factor, which is represented by beta.

I adjusted it upwards to reach two. Because in my opinion, The Trade Desk's future risk is several times higher than previous risks due to this new threat and the significant slowdown in revenue growth.

However, even after making this adjustment, the stock appears to be undervalued. It is trading at $15 per share today. It has recently seen a rise after dropping to around $12 or $13.

My fair value estimate, even after adjustment, is $31. Therefore, there is a significant upside opportunity here for The Trade Desk,

although my confidence in the management team's ability to capitalize on this upside diminishes with each passing quarter , as I see the situation getting worse and worse. Therefore, I own The Trade Desk stock in my investment portfolio.

I haven't sold any of my shares yet . I still intend to proceed with my plan to sell one-third of the shares I bought in The Trade Desk by the end of this year.

Remember that I bought my first batch of shares of " The Trade Desk" for about $43, then tripled my investment position at levels of $ 18, $19 and $20. The center I bought for over $40 is the third I intend to sell by the end of the year for the purpose of reducing tax losses.

Therefore, today I will reiterate my "buy" rating for The Trade Desk stock, but I am lowering my conviction level to the medium level. I began to lose confidence in the company's ability to withstand this threat.

I am beginning to lose patience with the company's ability to cope with and adapt to these changing dynamics , which is harming the business as a whole.

Therefore, I really need to see something positive from the company in its next quarter to remain an investor and interested, and to remain confident in their ability to survive and protect at least a large part of their business , despite my acknowledgment that they have lost some market share to Amazon.