US Markets
Trade Desk's Downbeat Guidance Indicates Macro, Structural Issues, Wedbush Says
Trade Desk's (TTD) downbeat third-quarter outlook following a second-quarter miss indicates macro and structural issues amid growing competition, Wedbush Securities said Friday.Late Thursday, the ad-buying software maker said it expected revenue of at least $650 million and adjusted earnings before interest, taxes, depreciation and amortization of about $160 million for the ongoing quarter. The current consensus on FactSet is for $711.2 million and $246.1 million, respectively.The company posted second-quarter adjusted earnings of $0.34 a share on revenue of $715.1 million, both falling short of Wall Street's estimates."Combined with mounting competitive threats and macro pressures within its largest segments, (Trade Desk) could not meet its (second-quarter) guidance," Wedbush analysts, including Alicia Reese, said in a note to clients Friday. "(Third-quarter) guidance is substantially more concerning, adding fuel to the bear thesis that the company faces immense structural headwinds."Trade Desk Chief Executive Jeff Green blamed the company's underperformance in the second quarter relative to its own expectations to two main reasons."First, the macro conditions have made it more difficult for some of the world's largest brands to grow," Green said on an earnings call Thursday, according to a FactSet transcript. "Secondly, we didn't execute as well as we could have."Wedbush reduced its price target on the company's shares to $15 from $21 and maintained its neutral rating.Apart from macro pressures that are reducing advertiser spend, Trade Desk is seeing "fierce" competition, particularly in the consumer packaged goods segment, according to the note."(Trade Desk) was built for open-internet scale and cross-publisher orchestration, while the market is increasingly gravitating toward closed-loop, vertically integrated performance ecosystems like Amazon's (AMZN)," the Wedbush analysts said. E-commerce giant Amazon continues to gain ground as "a core (connected television) performance partner, undermining (Trade Desk's) argument that advertisers do not want to exist within walled gardens."The company's reliance on third-party data partnerships with Walmart (WMT), DirecTV and Roku (ROKU) creates fragmentation and less deterministic measurement, compared with integrated platforms that own media, device and consumer data. Trade Desk's new measurement framework, which is in alpha testing phase, could provide it some competitive relief after it's launched, according to the note."As more (demand-side platforms) split the CTV growth, (Trade Desk) may increasingly rely on (total addressable market) expansion opportunities, such as chatbot inventory and sponsored shopping listings, where the company lacks a structural advantage," Wedbush said. "(Trade Desk) still offers meaningful advantages in frequency control, de-duplicated reach, multi-publisher planning, and optionality across CTV, display, audio, and out-of-home."Price: $13.83, Change: $-3.85, Percent Change: -21.76%
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