Slumped

Shares of The Trade Desk (TTD -1.14%) fell by a sharp 37.1% in August, according to data from S&P Global Market Intelligence. As of this writing on Sept. 3, The Trade Desk is down 55% this year and in the middle of its worst price drawdown ever.

Investors are concerned about slowing revenue growth for this advertising innovator, which has previously traded at a premium valuation. Here’s why The Trade Desk slipped yet again in the month of August.

Slowing growth, high expectations

On Aug. 7, The Trade Desk reported its second-quarter earnings. The advertising technology company that provides solutions for ad buyers outside of the large internet walled gardens had 19% year-over-year revenue growth in the quarter. Sales hit $694 million, with net income of $90 million for a margin of 13%.

In the same period a year ago, The Trade Desk reported revenue growth of 26%. Growth has begun to slow for this advertising disruptor, and even slower growth is expected in the third quarter, with guidance calling for 14% year-over-year gains to $717 million. In recent years, The Trade Desk has been a much faster grower. The company claims a huge addressable market for its decentralized targeted advertising across internet assets like connected TV, webpages, and even podcasts as an alternative to the likes of Google or Instagram.

In fact, Meta Platforms grew its advertising revenue by 21% year over year last quarter, which was actually faster than The Trade Desk at a much larger scale. Whatever gains The Trade Desk made in targeted digital advertising are now going in reverse, and investors are worried. The stock previously traded at a high valuation, with a price-to-sales ratio (P/S) of 20 before this dip.

Image source: Getty Images.

Is The Trade Desk stock a buy?

Even after this 37% drop in August, The Trade Desk still trades at a P/S ratio of 10, which is significantly above the S&P 500 index average of 3.2.

This is a company with an extremely high gross margin — 80% or so over the last 12 months — but one that has failed to see significant expansion of its bottom-line net income margin even though it has now reached a large scale. A P/S ratio of 10 is not cheap unless you believe that The Trade Desk will grow quickly or have sky-high bottom-line margins.

It has neither. For this reason, the stock is probably one you should not buy the dip on right now.

Shares in ConocoPhillips (COP -3.85%) were lower by more than 4% at noon today. The decline comes on the day news broke that eight OPEC+ members will meet on Sunday and discuss a production hike. While there’s no guarantee that a production increase will be agreed upon, or that any such increase will put pressure on the price of oil, the threat of it is enough to spook oil investors.

Why ConocoPhillips is uniquely exposed

Because ConocoPhillips isn’t an integrated oil major (meaning it doesn’t have substantive midstream or downstream assets), investors tend to value it based on its reserves (mainly crude oil and natural gas), an assumption about the long-term oil price (which many investors assume is the current price), and an approximation of its break-even price of oil (the price at which its costs and financial obligations are covered).

OPEC+ is reportedly considering raising production to lower the price of oil, as its collective competitive advantage as a relatively lower-cost producer would result in its winning market share back from producers in higher-cost countries like the U.S. Those producers include ConocoPhillips, which generates the majority of its earnings from the U.S.

For example, last year the United States, excluding Hawaii and Alaska, generated $5.2 billion in earnings for the company, with Alaska contributing $1.3 billion, while the pre-corporate-expense company total was $10.1 billion.

Image source: Getty Images.

OPEC+’s actions could result in competitive pressure on ConocoPhillips, particularly at a time when it is integrating Marathon Oil, a company it recently acquired for $22.5 billion to consolidate its presence in the U.S.