In the fast-paced world of digital advertising, Trade Desk Inc. (TTD) has sent shockwaves through the market, with its shares poised to take a staggering $9.4 billion hit in value.
Investors are on edge after the digital ad platform issued a cautionary note, predicting a slowdown in sales during the crucial year-end period.
Trade Desk, a dominant force in the programmable market for connected TV advertising, initially impressed Wall Street with third-quarter earnings that soared to $200 million, translating to 33 cents per share on revenues totaling $493.3 million.
However, the company’s optimistic facade crumbled as it revealed an anticipated decline in revenues to approximately $580 million for the final months of the year—significantly lower than analysts’ expectations of $611.5 million.
CEO Jeff Green addressed concerned investors in a late Thursday conference call, acknowledging a sudden cautiousness among some of the world’s largest advertisers, including those in industries impacted by recent strikes, such as the U.S. auto industry.
Green remains cautiously optimistic, stating, “Through the first week of November, we have seen spend stabilize, and we are optimistic for the remainder of the year and for 2024.”
In pre-market trading, Trade Desk shares plummeted by a staggering 25.6%, pointing towards a Friday opening bell price of $57.15 per share. Despite this dramatic drop, the stock would still boast a year-to-date increase of nearly 30%.
Analysts, such as Justin Patterson from KeyBanc Capital Markets, expressed surprise at the extent to which Trade Desk found itself entangled in the brand ad spend slowdown experienced by social advertisers.
Patterson, who maintains an ‘overweight’ rating on the stock, adjusted his price target to $84, emphasizing that if the revenue revision is primarily due to transitory factors, Trade Desk could see a rebound in growth against depressed estimates and a valuation at the lower end of the three-year range.
The unfolding saga at Trade Desk serves as a stark reminder of the volatility inherent in the digital advertising industry and leaves investors eagerly watching for signs of recovery as the company navigates the challenging landscape ahead.