Mackenzie Tatananni

Shares of The Trade Desk soared on Friday after the digital-advertising company posted strong first-quarter numbers following a dramatic revenue miss in the fourth quarter.

Adjusted earnings per share of 33 cents came in above the 25 cents analysts were expecting, according to FactSet. Revenue of $616 million handily topped the $575 million Wall Street had forecast.

Shares were up 22% to $73.01 on Friday, on pace for the largest same-day percent gain since a 32% jump in February 2023, according to Dow Jones Market Data, after a strong fourth-quarter report.

The benchmark S&P 500 and Nasdaq Composite were down 0.1% each.

The latest results drew a sharp contrast to Trade Desk's performance in the fourth quarter. Shares sank in February after revenue missed estimates for the first time in 33 quarters.

The miss was largely attributed to slower-than-anticipated adoption of Kokai, the company's artificial intelligence-equipped platform. However, Kokai gained traction with users in the most recent quarter, leaving bulls cautiously optimistic.

Morgan Stanley analysts led by Matthew Cost reiterated an Overweight rating on the shares while raising their price target to $80 from $60.

The first-quarter print indicates "the company may have greater control of its key growth drivers than the market had previously feared," the analysts wrote in a report. In other words, "reports of its death were greatly exaggerated."

The latest results indicate the fourth-quarter miss may have been the result of transitory factors, rather than a sign of structural headwinds, Morgan Stanley posited.

That's not to play down stiff competition from key players such as Amazon.com, and the debate surrounding Trade Desk's relationships with ad agencies, which will take quarters to unfold, the team said.

But the company's second-quarter guidance for 17% revenue growth is encouraging, especially considering it accounts for weakness in certain brand budgets like automotive and consumer-packaged goods.

KeyBanc Capital Markets analysts led by Justin Patterson reiterated an Overweight rating on Trade Desk stock, and lifted their price target to $80 from $67.

The firm views Trade Desk as a leading independent ad-tech company that's positioned to seize on "significant opportunities" in connected TV and retail media.

KeyBanc noted that Kokai has been adopted by roughly two-thirds of the company's clients, and management remains confident that all clients will have Kokai in their toolbox by the end of 2025.

Structural changes within the organization were equally encouraging, the analysts continued. Management indicated that "the business and product and engineering teams are more in sync than they have been in years," and that productivity was ramping.

"When viewed in tandem with the aforementioned Kokai point, we believe several of the factors contributing to 4Q's rare miss have resolved," KeyBanc wrote.

Seaport Research Partners analyst Aaron Kessler maintained a Neutral rating on Trade Desk stock, but provided similarly upbeat commentary.

While Trade Desk does expect some macro softness in the current quarter, this was factored into its guidance, Kessler wrote in a report. With that being said, he believes "the risk-reward remains balanced" with shares trading at 10 times Seaport's estimates for 2026 revenue.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com

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May 09, 2025 13:21 ET (17:21 GMT)

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