Why Did The Trade Desk Shares Fall After Reporting Earnings?

Yesterday was a brutal day for the market, but after The Trade Desk reported its first quarter earnings, its shares dropped almost 26%.

So what happened with The Trade Desk’s earnings? Was there a big miss or earnings or revenue? Did management admit that the company was actually a front for organised crime? Did the CEO reveal he was a shapeshifting lizard?

How did The Trade Desk perform in Q2?

For the last quarter, The Trade Desk reported an earnings beat (yes, I said beat) of $1.41 per share, smashing analysts expectations of $0.77 per share. Revenue, meanwhile, came in at just under $220 million, again beating expectations and representing healthy (and accelerating) year-on-year growth of 37%.

Customer retention remains at an impressive 95% while, for the year ahead, The Trade Desk expects revenue of between $259 million and $262 million — predicted year-on-year growth of close to 88% at the top end.

So, once again, what the hell happened?

Well, one thing that might have spooked some investors is that The Trade Desk announced a 10-1 stock split. This means that investors who hold shares in the company as of June 9 will receive nine additional shares of common stock. However, it’s very important to note that stock splits like this are just superficial and have no real impact on either investors or the company itself. To read more about stock splits, check out this article.

In reality, there were two things that really hurt The Trade Desk. The first one was being compared to larged rivals like Google and Roku, who both also reported massive earnings beats recently. The second, and perhaps more impactful reason, is the overall sell-off being experienced by tech stocks at the minute. There is a general consensus out there that many of last year’s high-flying stocks are priced to perfection at the minute, which means that any disappointment — no matter how slight — could trigger a bloodbath.

Now repeat after me: “Think long term, think long term…”