The Trade Desk’s Solid Recovery Reassures Investors After Dip

The past few months have posed challenges for investors in The Trade Desk (NASDAQ: TTD). The programmatic advertiser had consistently exceeded its own guidance for 32 quarters until it unexpectedly fell short, disappointing both Wall Street and Main Street. Following this setback, The Trade Desk’s stock plummeted more than 60% as wary investors exited.

Shareholders were anxiously awaiting the company’s quarterly financial results released Thursday after the market closed. Long-term investors found reassurance in the report, as The Trade Desk demonstrated a strong comeback, signaling a move past its earlier troubles.

Strong Financial Performance

The Trade Desk’s first-quarter results provided solid evidence that the company is regaining its footing. Revenue reached $616 million, reflecting a 25% increase year over year, an improvement from 22% growth in the previous quarter. Adjusted earnings per share (EPS) were $0.33, marking a 27% rise.

For context, analysts had forecasted revenue of $575.3 million and adjusted EPS of $0.25.

Key to this performance was the growing adoption of The Trade Desk’s artificial intelligence (AI)-driven Kokai platform. This advanced media buying system offers improved decision-making and ad campaign analytics. Kokai can process over 13 million advertising impressions every second, streamlining complex choices into actionable insights within milliseconds. The Trade Desk asserts that the platform enables advertisers to purchase optimal ad impressions at the right time and price to target their audiences effectively.

Previously, the company faced challenges transitioning customers from its older Solimar platform to Kokai. In response, The Trade Desk initiated a reorganization to enhance agility and better capture emerging sectors, such as connected TV (CTV), retail media, and audio.

“We’re encouraged by the early impact of the strategic upgrades we implemented in Q4, which significantly contributed to our outperformance,” stated co-founder and CEO Jeff Green. “As we build on this momentum, we’re optimistic about our ability to continue to outpace the market and deliver increasing value to marketers who prioritize objective, transparent, and data-driven media buying on the open internet.”

The company also noted strong customer retention, exceeding 95% during the quarter, a streak that has lasted for 11 consecutive years.

Future Expectations

After The Trade Desk’s sharp decline, some investors were understandably concerned. However, its rapid recovery signals a positive outlook. Management’s tone and projections indicate that stronger performance may still be on the horizon.

Looking ahead to the second quarter, The Trade Desk anticipates revenue of at least $682 million, representing roughly 17% year-over-year growth. It is noteworthy that the company often provides conservative guidance, suggesting that actual results may exceed expectations.

The Trade Desk’s stock currently trades at 34 times forward earnings. This valuation, while at a premium, is significantly lower than the average multiple of approximately 55 seen over the past three years.

Following its robust financial results, investors have reacted positively, pushing the stock up over 11% in after-hours trading.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.