What Happened?
Shares of advertising software maker The Trade Desk (NASDAQ:TTD) fell 10.5% in the morning session after the company reported underwhelming third-quarter results, with revenue and EBITDA roughly in line with Wall Street's expectations.
During the earnings call, management expressed concerns about budget constraints, hinting at potential difficulties in assessing the strength of consumers' purchasing power. This uncertainty has primarily impacted brands' ability to effectively target mid to low-income households, which are more price-sensitive and, therefore, harder to sell to.
While the quarter had some key positives, the stock seemed to be priced for perfection and exceeding expectations, not in-line results.
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What The Market Is Telling Us
The Trade Desk’s shares are somewhat volatile and have had 12 moves greater than 5% over the last year. But moves this big are rare even for The Trade Desk and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 12 months ago when the stock dropped 29.1% on the news that the company reported weak third quarter results and provided revenue and adjusted EBITDA guidance below expectations.
Management added that "We have seen more macroeconomic uncertainty at the start of Q4." The markets had been skittish about the macro, and The Trade Desk is a company heavily tied to macro-sensitive advertising, so the weak outlook likely raised alarm.
On the other hand, its revenue narrowly topped analysts' expectations. While it was objectively a mixed quarter for The Trade Desk since results were fine, the guidance was weak, and the market seems spooked about the future.
The Trade Desk is up 78.3% since the beginning of the year, and at $125.86 per share, it is trading close to its 52-week high of $132.53 from November 2024. Investors who bought $1,000 worth of The Trade Desk’s shares 5 years ago would now be looking at an investment worth $6,437.
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