Ten months ago, in March, 2021, we wrote that The Trade Desk (NASDAQ:TTD) stock can “exceed $1000, but not by much.” Shares were hovering around $750 at the time and, in our opinion, were extremely overvalued. Nevertheless, our Elliott Wave analysis suggested more upside ahead, before the bulls gave up.
On June 17, the company executed a 10-for-1 stock split. This technical maneuver brought the share count up ten-fold and the stock price down 90%. A single share that used to cost $750 before the split turned into 10 shares at $75 each post-split. This did not change the Elliott Wave pattern, though, so the implications of the chart below remained in force.
We thought a five-wave impulse was in progress. Waves (1)-through-(4) were in place already, so wave (5) was expected. Hence, our bullishness towards $1000. Once there, however, the theory states that a three-wave correction should follow. The updated chart shows how things went.
The first thing to notice is the price scale, which is reduced by a factor of 10. But a couple of other things deserve more attention. The first one is that wave (4) actually evolved into a triangle correction, labeled a-b-c-d-e. The second is the accuracy with which the Elliott Wave principle predicted the bearish reversal seven months in advance.
The Trade Desk Stock Is Still No Bargain
The Trade Desk stock reached $114.09 on Nov. 17. Last Friday, it closed below $60 for a 47% drop in just over two months. This crash looks like a single wave, so it makes sense to expect waves (b) and (c) before the correction is complete.
Unfortunately for TTD shareholders, the retracement might turn out much deeper than anticipated. Despite being cut almost in half already, this is still a $60 stock in a company making just cents per share in earnings. Regardless of its impressive sales growth and strong balance sheet, The Trade Desk remains extremely overvalued.