Friday morning was a rude awakening for shareholders of the Trade Desk (TTD), which fell more than 18% after delivering third-quarter earnings Thursday evening. Despite exceeding analysts’ forecasts, the stock is down on concerns of a weak ad environment going into the biggest quarter of the year.
The digital ad platform reported revenue of $493.3 million and 33 cents per share – topping the consensus for both the top and bottom line, which were slated at $487.04 million and 29 cents respectively.
Revenue represented a 25% increase year over year. Meanwhile, net income of $39 million was more than double the $16 million reported this time last year.
But the real takeaway was the muted guidance for the fourth quarter. Trade Desk is forecasting just $580 million – far below the consensus estimate of $610 million. The holiday season is rapidly approaching and in a time where this company thrives, they’re more cautious than ever.
A spokesperson with the company says that this is largely attributed to two main verticals undergoing strikes right now – the auto industry and media/entertainment. CEO Jeff Green says that there has been a tangible reduction in ad spend since October, as more and more advertisers are slowing their spending.
With that being said, Green still feels optimistic that the company will outperform its competitors and lead the charge in the industry. Other companies that offer digital advertising like Meta, Snap, and Pinterest reported a weakening environment themselves.
On the other hand, the Trade Desk is uniquely positioned with a tech stack that empowers brands to make the most of their advertising efforts. So, is today’s plummeting performance an overreaction? Or is it really time to sell this stock?
We’ve taken a look through the VectorVest stock forecasting software and uncovered 3 things you need to see…
Despite Fair Upside Potential and Very Good Safety, TTD Has Poor Timing - It’s Time to Sell This Stock
VectorVest saves you time and stress while empowering you to win more trades with less work. It’s based on a simple proprietary stock rating system that gives you all the insights you need in 3 ratings. These are relative value (RV), relative safety (RS), and relative timing (RT).
Each rating sits on its own scale of 0.00-2.00 with 1.00 being the average. You’re even offered a buy, sell, or hold recommendation based on the overall VST rating for any given stock, at any given time. Here’s what we found for TTD:
- Fair Upside Potential: The RV rating compares a stock’s long-term price appreciation potential to AAA corporate bond rates and risk based on a 3-year price projection. TTD has a fair RV rating of 1.04, but is way overvalued with a current value of just $20.87.
- Very Good Safety: The RS rating speaks to a stock’s risk level. It’s derived through an analysis of the company's financial consistency & predictability, debt-to-equity ratio, business longevity, price volatility, sales volume, and more risk factors. TTD has a very good RS rating of 1.27 right now.
- Poor Timing: The biggest issue for this stock is the fact that it has lost a quarter of its value in the past month, and it doesn’t appear this will turn around anytime soon. TTD has a poor RT rating of 0.53 which is based on the direction, dynamics, and magnitude of the stock’s price movement. The rating is taken day over day, week over week, quarter over quarter, and year over year to paint the full picture for investors.
The overall VST rating of 0.98 is just below the average, but deemed fair nonetheless. That being said, VectorVest has issued a SELL recommendation for TTD. Learn more through a free stock analysis today and transform your trading strategy for the better!
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VectorVest advocates buying safe, undervalued stocks, rising in price. TTD fell nearly 18% Friday morning after the company issued lackluster guidance that sparked grave concern about the road ahead. The stock has fair upside potential and very good safety, but poor timing is holding it back right now.
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