Why The Trade Desk’s Stock Soared on Friday

Ad-campaign automation specialist The Trade Desk (TTD 17.46%) sent its share prices soaring on Friday with a fantastic earnings report. The stock jumped as much as 24.2% in the morning before settling down at a still-impressive 19% gain by 12:15 p.m. ET today. The intraday peak reached a fresh two-year high.

The Trade Desk’s quarter, by the numbers

Fourth-quarter revenue jumped 23% higher year over year to land at $606 million. Adjusted earnings rose by 9% to $0.41 per diluted share.

Your average Wall Street analyst was looking for earnings near $0.43 per share on top-line sales of roughly $582 million. The Trade Desk fell short of the profit target while exceeding revenue expectations by a similar margin.

Looking ahead to the first quarter of 2024, Trade Desk management set its revenue target to “at least” $478 million. That would be a 25% annual increase, comfortably ahead of the consensus estimate of an 18% revenue gain.

Investors were happy to shrug off the bottom-line miss to focus on proven and promised revenue growth instead.

What’s the secret sauce behind this tasty report?

CEO Jeff Green said in a prepared statement, “Our results are testament to the growing value that advertisers are placing on the open internet versus the limitations of walled gardens.” Green also suggested that his company is growing faster than other digital advertising providers, which suggests that the company is stealing market share from its rivals.

The company generated $63.8 million of free cash flow in the fourth quarter — and then spent a cool $200 million on share buybacks. The Trade Desk’s leaders seem convinced that the stock is undervalued, making buybacks a good use of spare cash. It’s also a shareholder-friendly strategy, putting cash profits into its owners’ wallets.

If nothing else, The Trade Desk’s vibrant report and bullish guidance showed signs of life in the struggling market for online ad sales.