Trade Desk Shares Plummet 38% Post-S&P 500 Debut; Cathie Wood Seizes Buying Opportunity

TradingKey - Following the release of its Q2 earnings on August 7, advertising tech company Trade Desk (TTD) saw its stock plunge by 38.6% the next day. Despite the dramatic fall, Cathie Wood of Ark Investment Management seized the opportunity to increase her holdings, purchasing over 725,000 shares.

The company's Q2 revenue increased 19% year-over-year to $694 million, surpassing expectations and outpacing overall digital ad sales growth in the sector. However, investors remained unconvinced. 

After the earnings release, numerous analysts downgraded the stock, citing the growing threat from Amazon. Amazon's demand-side platform (DSP) has been gaining traction, helping advertisers better target users, particularly following agreements with streaming services like Roku. These agreements aim to grant advertisers exclusive access to U.S. connected TV users through Amazon's DSP—a significant growth segment for Trade Desk.

Adding to the structural pressures are the impending departure of the company's CFO and ongoing tariff uncertainties affecting advertisers, contributing to the steep decline in Trade Desk's stock price.

Notably, this was the company's first earnings report since being included in the S&P 500 index, and just three weeks after its inclusion, Trade Desk became the index's worst performer. 

The company's unexpected inclusion last month surprised the market, given its market cap of just $37 billion and a year-to-date stock price decline of 36%, underperforming against more popular candidates like Robinhood.

In response to the stock's collapse, Cathie Wood's Ark Investment purchased a significant amount of shares. The flagship ARK Innovation ETF (ARKK) acquired 535,292 shares, while the ARK Next Generation Internet ETF (ARKW) purchased 203,075 shares. Currently, TTD ranks 27th in ARKK with 1.57 million shares valued at approximately $85.14 million, and 29th in ARKW, holding 523,000 shares valued at about $28.39 million.

Ark Investment's last acquisition of TTD shares was in February, following an earnings announcement that led to a 33% single-day drop in the stock's price. 

Analysts suggest that this latest buy reflects Wood's characteristic approach of doubling down on high-growth tech stocks despite significant market downturns.

As of this year, Trade Desk has plummeted 54.76%, while ARKK has risen 30.58% and ARKW has climbed 45.63%.