The Trade Desk Inc. TTD shares plummeted 38.6% on Friday to close at $54.23, despite reporting second-quarter revenue that exceeded analyst expectations.

Check out the current price of TTD stock here. 

What Happened: The dramatic selloff followed the company’s first earnings report as an S&P 500 member, raising questions about its premium valuation amid intensifying competition from Amazon.com Inc. AMZN, the he Wall Street Journal reported on Friday.

The demand-side platform operator reported 19% year-over-year revenue growth to $694 million, beating consensus estimates of $685 million. Adjusted EBITDA reached $270.8 million, topping expectations of $261 million.

“Trade Desk can’t realistically maintain its current rate of revenue growth for the long term,” said Brian Wieser, founder of Madison and Wall consulting firm, according to WSJ, highlighting concerns about the company’s 66.32 price-to-earnings ratio.

Check out the current price of AMZN stock here. 

Amazon’s expanding advertising business poses the biggest competitive threat. The e-commerce giant’s ad revenue surged 23% year-over-year to $15.69 billion in the second quarter, driven partly by making ad-supported video the default Prime setting, according to the report. Amazon plans to sell ad inventory from Roku Inc. ROKU and has secured new NBA streaming rights.

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Why It Matters: “Amazon is more of a potential partner, honestly, than it is a long-term competitor,” Trade Desk CEO Jeff Green said during Thursday’s earnings call. However, Amazon’s significantly lower ad fees of approximately 1% compared to Trade Desk’s 12%-15% range creates pricing pressure.

Bank of America downgraded TTD to “underperform” and slashed its price target from $130 to $55, according to WSJ. MoffettNathanson cut its target to $45 from $75, both citing valuation concerns and growth deceleration.

Benzinga’s Edge Stock Rankings indicate, TTD stocks have negative trends across all time frames.  Find out how rivals in the digital advertising space rank.

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.