Trade Desk stock nosedives by 31% during post-market trading Thursday after the digital advertising platform issued a bleak fourth-quarter revenue forecast. This development raised concerns about the overall health of the ad market.
Social media giants Meta Platforms, Inc. (NASDAQ: META), Snap Inc. (NYSE: SNAP), and Pinterest, Inc. (NYSE: PINS) – all heavily reliant on advertising sales – also saw declines in response to Trade Desk’s grim outlook.
The Trade Desk, Inc. (NASDAQ: TTD) said that its revenue for the fourth quarter is expected to be at least $580 million. This figure falls short of the average analyst projection of $610 million, as per data compiled by Bloomberg.
Following the news, Trade Desk stock plummeted to $52.74, a notable decline from Thursday’s closing price of $76.81. This represents a significant setback, especially given its impressive 71% increase earlier in the year leading up to Thursday.
In a research note, Bloomberg Intelligence analysts Geetha Ranganathan and Kevin Near wrote that the forecast signals potential economic pressures may be impacting the advertising market, raising skepticism about the expected acceleration in revenue growth projected for 2024.
Speaking on a conference call following the forecast release, Trade Desk CEO Jeff Green revealed that the company observed a reduction in spending from businesses, particularly in the auto industry and consumer electronics, starting in October. He attributed these cutbacks to factors such as strikes affecting the U.S. auto industry.
However, Green provided a glimmer of hope, stating,
“Beginning this month, we have seen spend stabilize.”
Evercore analysts pointed to “brand spend weakness” linked to the Israel-Hamas war and a general sense of caution among brand advertisers and agencies regarding ad spend during that period.
The digital advertising sector appeared ready for a recovery following better-than-expected revenue results from Meta, Snap, and Pinterest in the latest quarter. But Meta’s shares declined as executives cautioned about a slowdown in advertiser spending. During a call with investors, Chief Financial Officer Susan Li expressed uncertainty about the revenue outlook for 2024, stating,
“We are very subject to volatility in the macro landscape.”