(Updated - November 10, 2023 6:54 AM EST)
The Trade Desk Inc . (NASDAQ:TTD) shares plunged 27% in pre-open trading Friday, but are off their worse overnight levels, after reporting better-than-expected third quarter results but providing fourth quarter guidance below the Street. About a half-dozen analysts have slashed numbers following the weak guidance, but most remain positive on the company's long-term trends.
The ad tech company reported that revenue in the third quarter rose 25% to $493 million, topping the consensus of $486.9 million. Non-GAAP EPS was $0.33, versus the consensus of $0.29.
For the fourth quarter, the company sees revenue of at least $580 million, which compares negatively to the consensus of $610.82 million.
The fourth quarter revenue figure would suggest growth of 18%, versus 25% this quarter and the consensus calling for 24%.
Further, the company sees fourth quarter adjusted EBITDA of approximately $270 million, versus the consensus of $291 million.
Reacting to the results, analysts at Stifel noted that softness in autos, media and entertainment, which were both impacted by strikes hurt October, but November has stabilized. Further, while the Middle East conflict was not called out, they believe that it likely contributed to some softness on the margin.
"There's no question the initial stock reaction is painful for shareholders, but we have just as much confidence today as we did yesterday that there is no independent DSP that even comes close to matching TTD's ability to innovate and take share from an overcrowded DSP market, its ability to capitalize on the ~$130bn of linear TV budgets that still need to convert to CTV, or its position as the DSP of choice across the vast majority of marketers," the analysts commented. "After the dust settles, we'd be buyers as the underlying fundamentals are as solid as ever, absent the macro." The analysts at Stifel reiterated a Buy rating while lowering their price target to $79 from $91.
Analysts at KeyBanc said they view the guidance as a "speed bump" and not something more serious.
"We underappreciated the degree to which TTD would be caught in the brand ad spend pause that social advertisers experienced," the analysts commented. "However, if we assume the bulk of the revenue revision is from transitory factors, The Trade Desk now has a clear path toward reaccelerating growth against: 1) depressed estimates (low-20% growth vs. mid-20% previously); and 2) a valuation near the low end of the three-year range at ~23x 2025E EV/EBITDA (based on the ~29% after-hours decline)." The analysts cut their price target to $84 from $100 but maintained an Overweight rating.
Shares of TTD were up 71% year-to-date ahead of the results.