Shares of Trade Desk (TTD) are under pressure on Wednesday after Stifel analyst John Egbert downgraded the stock to Hold, saying valuation keeps him cautious as he sees consensus expectations being "elevated."
MOVING TO THE SIDELINES: Ahead of the company's fourth quarter earnings this week, Stifel analyst John Egbert downgraded Trade Desk to Hold from Buy as he believes risk/reward appears balanced in the short-term after shares have risen 39%-plus year-to-date. While the analyst expects Trade Desk to post "healthy results" driven by "strong" seasonal trends in digital ad spending and continued adoption of its upgraded ad buying platform, Egbert pointed out that he approaches fourth quarter earnings somewhat cautiously as expectations appear "elevated." Looking ahead to 2019, the analyst expects revenue growth of 35%-plus year-over-year and adjusted EBITDA margin of 30%. While he remains bullish on Trade Desk's full year 2019 growth opportunity given steady tailwinds in mobile, ramping supply and demand in Connected TV, a fast-growing international opportunity, and upside from recent product enhancements, Egbert is somewhat cautious heading into the company's initial full year 2019 guidance given rising investor expectations/elevated valuation levels, the company's historical bias for issuing conservative guidance, and its preference for investing near-term revenue upside back into technology and development to drive growth. Additionally, Trade Desk will hit significantly tougher comps in the first half of 2019, he contended. Nonetheless, the analyst told investors that he would likely be a buyer of a material pullback in Trade Desk's shares provided top-line momentum appears intact.
PRICE ACTION: In afternoon trading, shares of Trade Desk have dropped over 9% to $146.54.
Keywords: earnings, fourth quarter, results, quarterly results, guidance, downgrade