What happened
Shares of The Trade Desk (TTD -0.54%) pulled back last month as the fast-growing adtech stock was weighed down by greater economic uncertainty, including higher interest rates, inflation, and fears of a recession.
While there was little company-specific news out on The Trade Desk, the macroeconomic issues were enough to push the stock lower in March. According to data from S&P Global Market Intelligence, The Trade Desk finished the month down 19%.
Image source: Getty Images.
As you can see from the chart below, the stock fell sharply in the first half of the month before recovering some of those losses in the second half of March.
So what
Most growth stocks got hammered in the first half of the month as concerns about inflation, rising interest rates, higher oil prices, and the war in Ukraine combined to briefly sink the Nasdaq into a bear market, or a decline of at least 20% from a recent high. The Trade Desk lost nearly 40% through the first half of the month.
Given the business's cyclical nature and pandemic-era boom, the sell-off is understandable. After all, The Trade Desk operates a demand-side platform, providing technology for brands and ad agencies to run ad campaigns. Demand for ads tends to decline in recessions, and there are already signs that the digital ad market is slowing down following a boom during the pandemic.
The Trade Desk also may need to grow into its valuation after soaring over the last two years. Benchmark analyst Mark Zgutowicz said as much when he initiated coverage on the stock with a hold rating, saying that the end of third-party cookies could present a challenge to the company. He also said the growth in its connected-TV business is already priced into the stock.
Now what
The Trade Desk CEO Jeff Green has said multiple times that the company is well prepared for the end of cookies thanks to its Unified ID 2.0 protocol, but the ramifications of Google's decisions to block third-party cookies on Chrome may not be fully known. Targeting could become more difficult or expensive for some of The Trade Desk's customers.
Trading at a price-to-earnings ratio of 75, Trade Desk is significantly more expensive than it was before the pandemic. Though the company looks poised for long-term success as the leader in the adtech industry, the near term could be more difficult, especially if the economy sinks into a recession as some analysts are forecasting.
