The Trade Desk stock jumped to its highest level since September 15 as investors cheered its third-quarter revenue, which showed the business is holding up relatively well. TTD rose to $14.93, a gain of 32% from its lowest point this year. The stock has also formed an island reversal pattern, which points to more near-term gains.

The Trade Desk published strong earnings report

The Trade Desk, a top company in the advertising space, where its solutions are used by large companies and agencies. Its business, which was experiencing strong growth a while ago, is going through challenges, with its momentum slowing down. 

In a report released on Monday, the company said that its revenue was largely flat at $736 million in the third quarter. This figure was much higher than what the company had guided and what analysts were expecting. 

Its net income tumbled to $38 million from $116 million in the same period last year, while the adjusted EBITDA of $266 million was lower than the previous $317 million.

Most notably, the company boosted its forward guidance, with management expecting the revenue to jump to $755 million. Analysts have been expecting its fourth-quarter revenue to come in at $751 million. 

The company has also announced that Dave Pickles, the co-founder who stepped aside in 2023, would be returning. This is important as Pickles is one of the pioneers in the programmatic ad space. In a statement, the CEO and co-founder said:

“Bringing Dave’s experience, technical judgment and deep understanding of our platform more directly into that work will help us shape what we believe is the next generation of advertising technology.”

Analysts have maintained a fairly positive outlook for the company. UBS Group maintained a buy rating on the company, noting that it had become undervalued. Stephen Ju, the analyst, maintained a price target of $15, slightly higher than where it is today. Kyro AI data shows that the average target among analysts is $18, also higher than the current level. 

Meanwhile, a look at data shows that the company is highly undervalued, which is understandable since its growth momentum has stalled. The data shows that it has a forward price-to-earnings ratio of 12.89, lower than the communications sector average of 14. It is also lower than the five-year average of 52. 

The cheap valuation explains why the company has continued repurchasing its stock recently. It has $269 million available for repurchases. It then approved $731 million in repurchases, a move that will continue.

The Trade Desk stock technical analysis

TTD stock chart | Source: TradingView

The daily chart shows that the TTD stock has been moving sideways since August, when it formed a down-gap after its earnings report. It has formed a narrow channel in this period, a sign that it has formed an island reversal pattern, a common bullish pattern. This pattern usually leads to a strong comeback.

The Relative Strength Index (RSI) has continued moving upwards, a sign that it is in a bullish reversal pattern. Also, the MACD indicator has also jumped in the past few months. 

Therefore, these patterns suggest that the stock will continue rising in the coming weeks. If this happens, the next important target to watch will be at $20, which is about 40% above the current level. On the flip side, a drop below the key support level of $11.6 will invalidate the bullish outlook.

The post Trade Desk stock is surging after earnings: will the island reversal push it higher? appeared first on Invezz