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Trade Desk Updates 1 Key Risk Factor
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Trade Desk Updates 1 Key Risk Factor

Shares of technology company The Trade Desk, Inc. (TTD) have surged 8.5% over the past month. TTD’s self-service, cloud-based platform enables advertising buyers to create and manage ad campaigns across formats and devices. TTD’s recent fourth-quarter performance came in ahead of the Street’s expectations on both its top-line and bottom-line fronts.

Revenue jumped 23.7% year-over-year to $395.6 million, outperforming consensus estimates by $6 million. Earnings per share (EPS) at $0.42 handily beat consensus estimates by $0.14. Notably, the launch of its new platform Solimar coupled with gains in CTV, identity, and retail data helped TTD increase its share of the data-driven advertising market during the year.

The gross spend on TTD’s platform during 2021 was $6.2 billion. Additionally, the company achieved customer retention of over 95%. For Q1, TTD sees revenue at $303 million and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $91 million.

Further, TTD has also announced a collaboration with LiveRamp to develop and deploy a new privacy-conscious identity solution, European Unified ID (EUID), for the European advertising market. While TTD will lead ID creation, LiveRamp will provide the required infrastructure for the solution.

With these developments in mind, let us take a look at the changes in TTD’s key risk factors that investors should know.

Risk Factors

According to the TipRanks Risk Factors tool, The Trade Desk’s top risk category is Finance & Corporate, contributing 14 of the total 50 risks identified for the stock.

However, in its recent report, the company has changed one key risk factor under the Tech & Innovation risk category. Compared to a sector average of 4 Tech & Innovation risk factors, TTD has 9.

TTD highlighted that it allows clients to make use of application programming interfaces (APIs) with its platform. The use of APIs by its clients has increased considerably in recent years, which also increases security and operational risks to TTD’s systems.

Additionally, while APIs offer greater ease and power for clients, they also heighten the risk of overuse of TTD’s systems, which can mean potential outages. The company has witnessed system slowdowns. Any failure in preventing outages or security breaches due to APIs could lead to government enforcement actions, damage claims, damage to reputation and goodwill, and higher costs. Any of these events could adversely impact TTD’s business and financials.

Hedge Fund Activity

TipRanks data points that Wall Street’s top hedge funds have decreased holdings in The Trade Desk by 52.9 thousand shares in the last quarter, indicating a negative hedge fund confidence signal in the stock based on activities of 6 hedge funds. Notably, Elizabeth Foreman’s Cunning Capital Partners has a holding worth $2.2 million in TTD.

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