Trade Desk Inc. shares plummeted the most in a year-and-a-half after the digital advertising platform gave a weak revenue forecast for the current quarter, sending a warning flare about the health of the ad market.
Snap Inc. and Pinterest Inc., social-media companies that rely on advertising sales, also fell on news of Trade Desk’s outlook.
Revenue in the quarter ending in December will be at least $580 million, Ventura, California-based Trade Desk said in a statement. Analysts, on average, projected $610 million, according to data compiled by Bloomberg. The stock fell as low as $60.23 in New York Friday morning, it’s biggest intraday decline since May 2022. The shares had gained 71% this year through Thursday’s close.
Trade Desk provides advertising technology that’s an alternative to services offered by Alphabet Inc.’s Google, Meta Platforms Inc. and Amazon.com Inc. The ad-buying platform works with some of the world’s biggest advertisers and brands, including Warner Bros Discovery Inc., Walmart Inc. and NBCUniversal.
The forecast shows “that economic pressures may be weighing on the advertising market and revenue-growth reacceleration that’s modeled for 2024 may be premature,” Bloomberg Intelligence analysts Geetha Ranganathan and Kevin Near wrote in a research note.
Chief Executive Officer Jeff Green, speaking on a conference call after the forecast was released, said Trade Desk began seeing a reduction in spending beginning in October by businesses such as the auto industry and consumer electronics “specifically around cell phones and media and entertainment. Some of these industries have been recently impacted by strikes such as the US auto industry.”
Beginning this month, “we have seen spend stabilize,” Green said.
Analysts at Evercore pointed toward “brand spend weakness” due to the Israel-Hamas war and “caution among brand advertisers and agencies around ad spend during that time.”
The digital ad market seemed to be poised for a rebound after Meta, Snap and Pinterest topped revenue expectations in the recent quarter. But Meta shares slid when executives warned of soft advertiser spending. “We are very subject to volatility in the macro landscape,” Chief Financial Officer Susan Li told investors during a call. The revenue outlook for 2024 is “uncertain,” she said.
--With assistance from Jeanny Yu.
(Updates with shares.)