Stock Story -
What Happened: Shares of advertising software maker The Trade Desk (NASDAQ:TTD) fell 10.4% in the afternoon session after major indices declined, with the Nasdaq down 3%, while the S&P 500 fell by 1.7% following weaker-than-expected earnings from Alphabet (NASDAQ:GOOGL) (YouTube Advertising revenue missed estimates) and Tesla (NASDAQ:TSLA) (7% drop in auto revenue).
In recent weeks, tech giants, including Microsoft (NASDAQ:MSFT), Alphabet, Meta (NASDAQ:META), and Apple (NASDAQ:AAPL), have shed some of their year-to-date gains as a new market narrative—in favor of small-caps stocks—gains some momentum following the growing conviction that the Fed will start to cut rates in the second half of the year. Notably, the Russell 2000 index has gained 9% since the beginning of the month. The sentiment also benefitted from improved inflation prints last month, as the headline numbers edged closer to the Fed's 2% target.
Overall, the shift suggests investors are finding more reasons to hold positions in risk assets, especially small caps that tend to be more volatile.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy The Trade Desk? Find out by reading the original article on StockStory, it's free.
What is the market telling us: The Trade Desk's shares are very volatile and over the last year have had 15 moves greater than 5%. But moves this big are very rare even for The Trade Desk and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was 9 months ago, when the stock dropped 29.1% on the news that the company reported third quarter results and provided revenue and adjusted EBITDA guidance below expectations. Management added that "we have seen more macroeconomic uncertainty at the start of Q4." The markets had been skittish about the macro, and The Trade Desk is a company heavily tied to macro-sensitive advertising, so the weak outlook likely raised alarm.
On the other hand, its revenue narrowly topped analysts' expectations. While it was objectively a mixed quarter for The Trade Desk since results were fine, the guidance was weak, and the market seemed spooked about the future.
The Trade Desk is up 28.4% since the beginning of the year, but at $90.54 per share it is still trading 10.8% below its 52-week high of $101.52 from July 2024. Investors who bought $1,000 worth of The Trade Desk's shares 5 years ago would now be looking at an investment worth $3,649.
