Here’s why Trade Desk is down 20% on Monday

By: Wajeeh Khan
Wajeeh Khan
Wajeeh is an active follower of world affairs, technology, an avid reader, and loves to play table tennis in his free… read more.
on May 10, 2021
  • Trade Desk slides 20% in the stock market on guidance warning.
  • The U.S. company beats Wall Street estimates in the first quarter.
  • The software firm announces a 10-for-1 stock split on Monday.

Trade Desk Inc. (NASDAQ: TTD) tanked about 20% in the premarket trading on Monday as the company gave guidance for the fiscal second quarter that topped FactSet consensus but one that came with a warning. The software company said:

“We have not provided an outlook for GAAP Net income or reconciliation of adjusted EBITDA guidance to net income, the closest corresponding U.S. GAAP measure, because net income outlook is not available without unreasonable efforts on a forward-looking basis due to the variability and complexity with respect to the charges excluded from these non-GAAP measures; in particular, the measures and effects of our stock-based compensation expense that are directly impacted by unpredictable fluctuations in our share price. We expect the variability of the above charges could have a significant and potentially unpredictable impact on our future U.S. GAAP financial results.”

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Trade Desk expects its revenue in Q2 to fall in the range of £183.28 million to £185.41 million.

Trade Desk announces a 10-for-1 stock split

The Board of Directors approved a 10-for-1 stock split (Trade Desk’s first since it debuted on the NASDAQ stock exchange in 2016) on Monday. Trading on a split-adjusted basis will begin on 17th June.

On a year-to-date basis, Trade Desk is now roughly 30% down in the stock market after a close to 200% gain last year. At the time of writing, the software company has a market capitalisation of £17.75 billion and a price to earnings ratio of 106.68.

The sharp decline in share price was particularly surprising as the Nasdaq-listed firm reported its Q1 financial results on Monday that beat Wall Street estimates.

Trade Desk’s Q1 financial results

Trade Desk reported £15.99 million of net income (31.84 pence per share) in the first quarter versus £17.05 million (35.38 pence per share) last year. On an adjusted basis, the global tech firm earned £1.0 per share, compared to the previous year’s 63.69 pence per share. Revenue, Trade Desk added, jumped 36.8% in the recent quarter to £155.54 million.

According to FactSet, experts had forecast £153.49 million of revenue for Trade Desk in the first quarter and 56.61 pence of earnings per share. Other notable figures in the California-based company’s earnings report include a 46.5% increase in technology and development spending and a 62.6% increase in sales and marketing expenses, resulting in a 41.5% increase in total operating expenses.

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