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Trade Desk shares plunge 30% on weak guidance tied to auto strikes

By admin Dec5,2023

Jeff Green, CEO, The Trade Desk

Scott Mlyn | CNBC

The Trade Desk shares plunged about 30% in after-hours trading on Thursday after the ad-tech company issued fourth-quarter revenue guidance that fell well short of analysts’ estimates.

Third-quarter results topped estimates. Here’s how the company did:

  • Earnings per share: 33 cents, adjusted vs. 29 cents expected by LSEG, formerly known as Refinitiv
  • Revenue: $493 million vs. $487.04 million expected by LSEG

For the December period, Trade Desk projected revenue of at least $580 million, trailing the $610 million that was expected by analysts, according to LSEG.

A Trade Desk spokesperson told CNBC that guidance came “in slightly below consensus, largely because the transitory cautiousness from advertisers in certain verticals, such as U.S. auto and media/entertainment due to the strikes.”

The United Auto Workers launched targeted strikes at select facilities against the Detroit automakers beginning Sept. 15, and then expanded the stoppages. The UAW and General Motors agreed to a deal at the end of October that would put an end to bargaining, following prior agreements with Ford Motor and Stellantis.

Separately, Hollywood actors initiated a work stoppage in mid-July and just came to an agreement with studios this week. The Writers Guild of America forged a new contract with studios in September after a strike that began in May.

Jeff Green, Trade Desk’s CEO, said on the earnings call that “starting about the second week of October, we began to see some transitory cautiousness around certain advertisers.”

“We saw some reduction in brand spend in verticals such as automotive and consumer electronics, for instance, specifically around cell phones and media and entertainment,” Green said. “Some of these industries have been recently impacted by strikes, such as the U.S. auto industry.”

Trade Desk’s technology helps brands reach relevant potential customers across the internet and has flourished in the world of streaming and online video. While most independent ad-tech companies have struggled to compete with Google’s systems, Trade Desk has built a business, valued at $38 billion prior to its earnings report, largely by helping companies shift ad budgets from traditional television to the connected TV market.

Green said that spend “stabilized” in the first week in November, and “we’re very confident that we will continue to outpace our industry.”

He added that the company’s “business is largely based on the world’s largest brands,” which means “if there is a little caution due to macro uncertainty facing everyone, we, of course, won’t be immune from that in the short term.”

Trade Desk said third-quarter sales jumped 25% from $493 million a year earlier. Net income increased to $39 million, or 8 cents a share, from $16 million, or 3 cents, a year earlier.

The stock fell to $53.49 in extended trading after closing on Thursday at $76.81. Prior to the after-hours move, the shares were up 71% for the year.

Meta, Snap and Pinterest all noted a softening of the digital advertising market in their latest earnings reports due in part to the Israel-Hamas war.

Susan Li, Meta’s chief financial officer, said the company widened its guidance because of unpredictability surrounding the Middle East Crisis, while Snap said it would not provide official guidance “due to the unpredictable nature of war.”

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