Key Points
A rival appeared to have nabbed a major AI developer as a client.
Investors were also unsatisfied with the company's restructuring plans.
The Trade Desk (NASDAQ:TTD) was the wrong kind of busy in September. The next-generation adtech company didn't look like a business primed for the future after announcing a restructuring plan, witnessing a rival score a high-profile client, and being booted from a major stock index, among other setbacks.
Last month was a blustery one full of headwinds for The Trade Desk, so perhaps it's lucky to have exited September with "only" an 11% decline in its share price. Yet I think it could go lower. Before we get to that, however, let's recap the company's not-so-good month.
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Restructurings and roadblocks
September didn't start on an encouraging note for The Trade Desk. Numerous media outlets, citing a company statement, reported that it planned to cut its workforce by roughly 15% as part of a broader restructuring effort. The company effectively confirmed this in a regulatory filing, in which it estimated that such moves would result in charges of around $39 million to $51 million, offset by a reversal of approximately $4 million to $5 million in stock-based compensation. There was clearly some urgency to this for The Trade Desk, as it expressed a desire to complete the process by the beginning of the third quarter (i.e., the start of October).
Also, early in the month, The Trade Desk was removed from the benchmark S&P 500 index. In a quarterly rebalancing by the index's operator, S&P Dow Jones Indices, the company's stock was shifted to the S&P SmallCap 600 Index. Such was the effect of a shrinking price and, therefore, market cap, on the beaten-down stock.
As if these body blows weren't enough, its rival Amazon (NASDAQ:AMZN) Ads announced a new advertising partnership with top artificial intelligence (AI) developer OpenAI. Under its terms, Amazon Ads clients will have the option to expand their campaigns into conversational experiences using OpenAI's ChatGPT model. Amazon added that select advertisers, which it did not name, were testing this service in a pilot program.
Finally, at the end of the month, industry website Ad Exchanger published a story stating that The Trade Desk was unable to serve ads to Apple's (NASDAQ:AAPL) Safari browser in certain instances. The problem, apparently, was the tech company's iOS 27, the latest iteration of its operating system. Ad Exchanger said Apple was investigating the issue. As of this writing, the situation had not been resolved.
A September not to remember
The Trade Desk has shown resiliency in the past, so I wouldn't underestimate its ability to rebound. Yet that seemingly urgent restructuring project indicates a company scrambling to avoid trouble, and Amazon Ads looks like it might be a tough competitor with abundant resources. It doesn't feel to me like The Trade Desk has a sufficient moat, so it's vulnerable. I believe we might not be seeing the bottom for this stock yet.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Apple, and The Trade Desk. The Motley Fool has a disclosure policy.