The Trade Desk Stock Proves Mortal After Earnings

The Trade Desk's (NASDAQ: TTD) streak of moving higher the week it reports quarterly results appears to be coming to an end. Shares of the programmatic advertising specialist initially moved lower on Thursday afternoon after the company posted third-quarter results. The financial report exceeded The Trade Desk's earlier guidance, but its outlook for the current quarter is coming in a bit light.

Revenue rose 50%, to $79.4 million for the quarter, well ahead of the $76 million it was targeting three months ago. The Trade Desk is singling out several countries -- Spain, France, Singapore, Germany, Korea, and Indonesia -- where top-line results more than doubled. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) soared 47%, to hit $24.4 million, also barreling through the $21 million it was modeling back in August.

The Trade Desk doesn't offer up bottom-line guidance, but adjusted net income rose 63%, to $15.3 million, or $0.35 a share. The performance has all the makings of another blowout performance for The Trade Desk -- but then we get to its problematic guidance.

There's no "i" in Trade unless it's a tirade

A signature move in The Trade Desk's brief public tenure is to push its guidance higher after every quarter. We're seeing it again on Thursday afternoon, but it's not as encouraging as it may seem.

The Trade Desk is raising its full-year outlook for revenue by $3 million, to $306 million, and its adjusted EBITDA goal is moving up by $2 million, to $90 million. This may not seem so bad at first glance, but keep in mind that The Trade Desk's revenue and adjusted EBDITA for the third quarter exceeded its guidance by $3.4 million on both fronts.

That number is higher than the amount it's raising its full-year guidance, so the $101 million in revenue and $34 million in adjusted EBITDA that it's modeling for the fourth quarter is less than what was implied three months ago. The Trade Desk didn't officially announce its fourth-quarter guidance in August, but subtracting its first-half results and third-quarter guidance from its full-year outlook would have arrived at slightly higher forecasts.

It also doesn't help that the stock had been rallying heading into the report. The Trade Desk was one of this year's biggest winners, up 114% through Thursday's close. Even after the initial hit in Thursday's after-hours trading, the stock still has nearly tripled since going public at $18 last year.

The Trade Desk's platform is still clicking with ad buyers. The data-driven system that makes it easy to purchase advertising across various media channels has retained at least 95% of its clients for 16 consecutive quarters. The stock may sometimes get ahead of the fundamentals, but the growth is still there in strides.

The Trade Desk's seemingly disappointing guidance still implies revenue and adjusted EBITDA growth of 40% and 19%, respectively, for the fourth quarter. The stock has proven mortal, but the model is still resonating with forward-thinking ad teams.

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Rick Munarriz has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends The Trade Desk. The Motley Fool has a disclosure policy.