What Happened:
Shares of advertising software maker The Trade Desk (NASDAQ:TTD) fell 5.6% in the afternoon session as the major indices declined (Nasdaq down -1.70%, S&P 500 down -1.1%, Dow down -0.61%), while yields soared. Geopolitical tension heightened following reports on Saturday, April 13, 2024, that Iran launched drones and missiles at Israel, driving uncertainty about possible disruption to global trade and commerce should the tension escalate. Also, the Census Bureau report revealed March 2024 retail sales rose 0.7% compared to the previous month (ahead of market expectations for a 0.3% increase), suggesting consumption is strong amidst recent inflation concerns.
Prior to these reports, market volatility had picked up after the March 2024 CPI (Consumer Price Index - a gauge of the average price consumers pay for goods and services) report revealed inflation came in slightly hotter than expected, adding to fears that the Fed could delay rate cut plans in 2024.
As a reminder, the driver of a stock's value is the sum of its future cash flows discounted back to today. With lower interest rates, investors can apply higher valuations to their stocks. No wonder so many in the investment community are optimistic about 2024. We at StockStory remain cautious, as following the crowd can lead to adverse outcomes. During times like this, it's best to own high-quality, cash-flowing companies that can weather the ups and downs of the market.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy The Trade Desk? Access our full analysis report here, it's free.
What is the market telling us:
The Trade Desk's shares are very volatile and over the last year have had 14 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 5 months ago, when the stock dropped 29.1% on the news that the company reported 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 have been skittish about the macro, and The Trade Desk is a company heavily tied to macro-sensitive advertising, so the weak outlook may cause alarm.
On the other hand, its revenue narrowly topped analysts' expectations this quarter. 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 15.4% since the beginning of the year, but at $81.36 per share it is still trading 10.9% below its 52-week high of $91.26 from July 2023. Investors who bought $1,000 worth of The Trade Desk's shares 5 years ago would now be looking at an investment worth $4,031.
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