Trade Desk shares plunge about 30% after ad-tech company issues weak guidance

The Trade Desk shares plunged about 30% in after-hours trading on Thursday after the ad-tech company issued fourth-quarter revenue guidance that fell well short of analysts’ estimates.

Third-quarter results topped estimates. Here’s how the company did:

• Earnings per share: 33 cents, adjusted vs. 29 cents expected by LSEG, formerly known as Refinitiv
• Revenue: $493 million vs. $487.04 million expected by LSEG

For the December period, Trade Desk projected revenue of at least $580 million, trailing the $610 million that was expected by analysts, according to LSEG.

A Trade Desk spokesperson told CNBC that the company’s fourth-quarter guidance came “in slightly below consensus, largely because the transitory cautiousness from advertisers in certain verticals, such as U.S. auto and media/entertainment due to the strikes.”

Laura Schenkein, the chief financial officer for The Trade Desk, said during a call with analysts that the company has “seen more macro-economic uncertainty at the start of q4.”

Adding to Schenkein’s comments, Trade Desk CEO Jeff Green said that “starting about the second week of October, we began to see some transitory cautiousness around certain advertisers.”

“For example, we saw some reduction in brand spend in verticals such as automotive and consumer electronics, for instance, specifically around cell phones and media and entertainment,” Green said. “Some of these industries have been recently impacted by strikes, such as the US auto industry.”

“So, the first week in November we have seen spend stabilized and we’re very confident that we will continue to outpace our industry and gain market,” Green said.

Green continued saying that the company’s “business is largely based on the world’s largest brands,” which means “if there is a little caution due to macro uncertainty facing everyone, we, of course, won’t be immune from that in the short term.”

“But we’re convinced that the macro pressures today represent land grab opportunities now that will show fruit or pay off over and over again in the years to come,” Green said. “The fundamentals of our long-term business are as solid as they’ve ever been.”

Trade Desk said third-quarter sales jumped 25% from $493 million a year earlier. Net income increased to $39 million, or 8 cents a share, from $16 million, or 3 cents, a year earlier.

The stock fell to $53.49 in extended trading after closing on Thursday at $76.81. Prior to the after-hours move, the shares were up 71% for the year.

Trade Desk’s technology helps brands reach relevant potential customers across the internet and has flourished in the world of streaming and online video. While most independent ad-tech companies have struggled to compete with Google’s systems, Trade Desk has built a business, valued at $38 billion prior to its earnings report, largely by helping companies shift ad budgets from traditional television to the connected TV market.

Meta, Snap and Pinterest all noted a softening of the digital advertising market in their latest earnings reports due in part to the Israel-Hamas war.

Susan Li, Meta’s chief financial officer, said the company widened its guidance because of unpredictability surrounding the Middle East Crisis, while Snap said it would not provide official guidance “due to the unpredictable nature of war.”

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