Motley Fool: Consider buying the dip
The Trade Desk (Nasdaq: TTD) had its worst day as a public company on Aug. 8, with shares dropping nearly 40% as investors processed second-quarter financial results, a new incoming CFO and cautious third-quarter guidance due to tariff uncertainty. Multiple analysts think the market overreacted, though. The Trade Desk recently had a median target price of $75 per share, implying 43% upside from its recent share price of $52.
The Trade Desk operates a major independent cloud-based, artificial-intelligence-powered platform that helps advertisers plan campaigns and optimize their spending, getting the right ads in front of the right eyeballs. Its independence – meaning it does not own media content that might bias ad spending on its platform – distinguishes it from larger competitors such as Alphabet’s Google, Meta Platforms and Amazon.
The company has consistently taken market share from rivals in digital advertising, and CEO Jeff Green believes that trend will continue for the foreseeable future.
Despite the sharp decline in the stock, the Trade Desk actually reported reasonably good second-quarter financial results that beat estimates on the top line – revenue rose 19% year over year, to $694 million.
Patient and risk-tolerant long-term investors might want to take a closer look at the Trade Desk. (The Motley Fool owns shares of and recommends the Trade Desk.)
Ask the Fool
Q. What’s the prime rate? – J.F., Green Bay, Wisconsin
A. It’s the interest rate that most banks charge their lowest-risk commercial customers – typically around 3 percentage points higher than the federal funds rate, the rate at which banks lend money to each other.
Every bank sets its own prime rate, though many use the Wall Street Journal Prime Rate, which is based on the rates used by many of the biggest United States banks. The prime rate is important because it’s used as a base rate for many other interest rates, such as those charged for mortgages, home equity loans, credit cards and small business loans. Many credit cards, for instance, set their interest rates by taking the current prime rate and adding a certain amount based on the perceived risk to the lender. The Wall Street Journal Prime Rate was recently 7.5%, down from 8.5% a year earlier.
Q. Should I avoid companies with growing losses instead of growing profits? – N.L., Exeter, New Hampshire
A. Rising profits are certainly more desirable than increasing losses. But for best results with any company that interests you, do some digging to see what’s really happening. One company might be posting losses because of products not selling, a huge accounting scandal or formidable competition. Another company might be selling its products like hotcakes, but posting losses because it’s investing a lot to further its growth, perhaps by hiring more workers, spending more on advertising or acquiring other companies or technologies. The latter company could just slow down spending on growth at some point and become profitable then – it’s less of a risk for investors.
My smartest investment
My smartest financial move was simply working for Mastercard. – E.D., via email
The Fool responds: You’re absolutely right! We often think of smart financial moves in terms of great investments, but working for a company that pays you well and offers great benefits is also a financially savvy move. We don’t know exactly when you worked for Mastercard, but a glance at its website today reveals employee benefits such as a 10%-of-base-pay matching retirement contribution (with workers vested on day one), 16 weeks of fully paid parental leave, financial assistance with adoption and fertility treatments, five paid volunteer days a year, access to fitness centers (or reimbursement for them) and flexible work schedules – among other things.
When job-hunting – or thinking of job-hopping – it’s smart to think of which benefits are most important to you and then to compare those offered at companies you’re considering. A quick online search will turn up lists of great companies to work for; you can research benefits, salaries and/or employee satisfaction, among other things, at sites such as Indeed.com, Glassdoor.com and GreatPlaceToWork.com. Companies offering good pay and strong financial benefits can help you build a nest egg faster.
(Do you have a smart or regrettable investment move to share with us? Email it to TMFShare@fool.com.)