What Happened:
Shares of advertising software maker The Trade Desk (NASDAQ:TTD) fell 29.1% in the morning session after 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 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 22 moves greater than 5%. But moves this big are very rare even for The Trade Desk and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was 7 months ago, when the stock gained 5.7% on the news that competitor Meta reported impressive first-quarter results that surpassed analysts' daily active users (DAU), revenue, operating profit, earnings per share (EPS), and free cash flow expectations. Sales climbed in the first three months of the year, snapping a cycle of three straight quarters of revenue drops. Additionally, advertising revenue surpassed Consensus expectations, which was a positive read-through for the current state of the digital ad market. The Trade Desk, which is a programmatic platform enabling digital ad placement, is one of the potential beneficiaries.
The Trade Desk is up 44.8% since the beginning of the year, but at $63.47 per share it is still trading 30.5% 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 $5,747.
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