Shares of The Trade Desk (NASDAQ: TTD) were falling today as a solid earnings report wasn't enough to please investors in the high-priced ad tech stock.
As a result, shares were down 6.9% as of 11:52 a.m. ET on Friday.
Image source: Getty Images.
Good, but not good enough
The Trade Desk came into the third-quarter earnings report with a sky-high valuation, which seemed to be the reason the stock fell, since investors wanted a wider beat than they got.
Revenue in the quarter rose 27% to $628 million, which beat the consensus at $619.9 million. The company also saw strong margin expansion on the basis of generally accepted accounting principles (GAAP) as investments like its Kokai AI platform upgrade pay off.
Customer retention remained above 95%, continuing a quarterly streak that has lasted for 10 years, and its Unified ID 2.0 protocol continues to extend its reach, forging partnerships with Roku and Spotify.
Its GAAP operating income nearly tripled to $108.5 million as spending on technology and general and administrative expenses was mostly flat. On an adjusted basis, earnings per share rose from $0.33 to $0.41, ahead of the consensus at $0.39.
CEO Jeff Green expressed optimism for the fourth quarter, saying, "As we enter our business time of year and look ahead of 2025, we have never been in a better position to capture greater share of the $1 trillion advertising [total addressable market]."
What's next for The Trade Desk
The company expects revenue of at least $756 million, representing at least 25% growth from the quarter a year ago.
On the bottom line, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) are expected to total around $363 million, showing a margin of close to 50%.
With the stock trading at a price-to-earnings ratio around 200 based on GAAP earnings, it's understandable why shares are falling, but The Trade Desk seems well positioned for long-term growth after the latest report.
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Jeremy Bowman has positions in The Trade Desk. The Motley Fool has positions in and recommends The Trade Desk. The Motley Fool has a disclosure policy.
