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Why Pinterest, Esty, and The Trade Desk Are Falling Hard

By Brian Feroldi - Updated Mar 12, 2020 at 2:45PM

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Another day, another big sell-off on Wall Street.

What happened

Shares of Pinterest (PINS -2.47%)Etsy (ETSY -2.61%), and The Trade Desk (TTD -2.94%) are tumbling. These stocks all dropped by double-digits in early afternoon trading on Thursday. As of 2:00 p.m. EDT, they were down 13%, 12%, and 11%, respectively. 

So what

All of the major U.S. stock market indices plunged on Thursday. The S&P 500, Dow Jones Industrial, and Nasdaq were all down by more than 7% at one point. The decline was so severe that it tripped a stock market circuit breaker, which put a temporary stop to trading.

The huge sell-off is linked to the worsening news surrounding the novel coronavirus pandemic. As of Wednesday, the World Health Organization stated that the virus has spread to more than 100 countries and has infected over 100,000 individuals.

A bar chart with an arrow crashing into the ground

Image source: Getty Images.

Traders are selling off stocks en masse today in response, and highly valued growth stocks such as Pinterest, Etsy, and The Trade Desk were sold off even more rapidly. 

Now what

As a part owner of all three of these companies, the last few months, weeks, and days have been very unpleasant. Etsy and The Trade Desk are now down 36% and 37%, respectively, from their recent highs. Pinterest has been hit even harder. Its stock is down 63% from its mid-2019 highs.

I understand why these stocks are being slammed right now, but a closer look at these companies' results shows that they are executing just fine.

Last quarter, Pinterest reported user growth of 26% to 335 million. Revenue growth came in even faster at 46%. Management expects to grow its top line another 33% in 2019. It's possible that the spread of the novel coronavirus might slow the company down a bit, but I expect 2020 will be another good year for the business.

Etsy posted revenue growth of 35% in the most recent quarter, which capped off another successful year. Active buyers and sellers continue to expand --  growing 28% and 18%, respectively, last year -- and the company is solidly profitable. Management is guiding for revenue growth of 27% to 30% in 2020. That should be music to any investor's ears.

The Trade Desk also continues to grow like gangbusters. Revenue soared 35% in the fourth quarter of 2019 to $216 million, and adjusted EPS grew 36% to $1.49. Management stated that it saw "continued share gain" across its platform, and they expected revenue in full-year 2020 to be at least $863 million. That represents growth of 30%, and it's worth pointing out that this management team has a history of outperforming its guidance.

It's impossible to predict where the companies' stocks are heading next, but each of their management teams seems to believe 2020 will be another great year for all of their businesses. If they're right, these companies' stock prices will eventually take care of themselves.

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Stocks Mentioned

Etsy, Inc. Stock Quote
Etsy, Inc.
ETSY
$85.94 (-2.61%) $-2.30
The Trade Desk Stock Quote
The Trade Desk
TTD
$42.99 (-2.94%) $-1.30
Pinterest Stock Quote
Pinterest
PINS
$19.73 (-2.47%) $0.50

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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