Shares of the online advertising specialist The Trade Desk went significantly lower on Friday. The stocks dropped 16% after a weak outlook for the rest of the year. It is time to take a closer look at the numbers, forecasts, and analysts’ assessments.

The Trade Desk: The Specialist for Digital Advertising Digital advertising is a booming market with double-digit growth rates for years to come. The company The Trade Desk offers automated tools with which corporate customers can buy digital ads and optimize their return. The Trade Desk’s applications use artificial intelligence (AI) to identify the best websites on which it is worth buying and broadcasting ads.

It is not just about web ads (display), but also about ads in smartphone apps (mobile), advertising with video streaming providers on the web, via internet radio or podcasts (audio) or even internet TV (connected TV). With programmatic advertising, the advertiser can use The Trade Desk’s software to select a very specific target group and to advertise efficiently across all these online channels.

Platform provides strong growth rates Over the past years, the company has achieved strong growth rates with its intelligent platform. From 2014 to 2022, revenues rose from $44 million to $1.57 billion. Unlike many other start-ups, The Trade Desk has been profitable for years. In the last financial year, a profit of $53.39 million was posted.

Revenue up 25% in third quarter In the third quarter, Trade Desk continued on its growth path: In total, revenues of $493 million were recorded (+24.9% compared to the previous year). This was $6.02 million above expectations (Source: Seeking Alpha). Most of the revenues (87%) were generated in the USA.

Meanwhile, the technology company remained profitable in the third quarter, which was a positive contrast to the advertising-dependent companies. The adjusted earnings before taxes, interest and depreciation (EBITDA) rose 22.6% compared to the previous year quarter to $199.5 million. Accordingly, the EBITDA margin was 40.5%, 0.8 percentage points below the previous year’s level.

At the end of the day, there was an adjusted net profit of 33 cents per share. This was four cents above the analyst forecasts.

Forecast of advertising spending still difficult However, the US advertising technology specialist is under pressure as a slowdown in online advertising spending is currently being seen. Companies are cautious with their advertising spending out of fear of an economic recession. For the fourth quarter of the current financial year 2023, the management of The Trade Desk expects revenues of at least $580 million (+18% compared to the previous year quarter). The adjusted EBITDA should be around $270 million. This seems to be too little for investors, as the significant share price reaction shows. The previous revenue estimates were $610 million.

Analysts see moderate share price potential Meanwhile, analysts are divided. Of the 31 experts who are dealing with the stock, 22 are recommending to buy the shares. Another 4 analysts rate the stock as a hold, while 5 are voting to sell the stock. The range of target prices is huge and ranges from $28 to $100 (closing price on Friday 11/10/2023: $64.01). The average target price of all analysts currently stands at $76, around 18% above the current share price level.