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What happened

Shares of The Trade Desk (NASDAQ: TTD) were pulling back last month as part of a broad sell-off in high-growth tech stocks. The company beat headline estimates in its second-quarter earnings report, but the stock still fell as investors seemed to expect more, given its high price tag.

According to data from S&P Global Market Intelligence, the stock finished the month down 12%.

As you can see from the chart below, the general trend in the stock tracked with the Nasdaq over the month, although it was down more sharply, especially after its earnings report came out on Aug. 9.

^SPX data by YCharts.

So what

The Trade Desk slipped through the first half of August as the Federal Reserve continued to indicate that it expected to raise interest rates again, and downbeat economic data came out of China.

Additionally, tech stocks sold off following earnings reports as investors seemed to signal that this year’s rally had gone far enough, especially as the prospect of a recession still looms over the market.

Despite a slowdown in the digital advertising industry, The Trade Desk, the leading demand-side platform (DSP), has continued to perform well in a challenging economy, and that resilience was on display once again in its second-quarter earnings report.

Revenue in the second quarter increased 23% to $464.3 million, topping estimates at $455 million.

The Trade Desk posted another quarter of at least 95% customer retention, continuing a streak of nine years.

It also continued to make progress with its Unified ID 2.0 (UID2) protocol, which it is positioning as a replacement for third-party cookies.

Warner Bros. Discovery said it would integrate with UID2, and Walmart Connect said it’s testing UID2 for its own DSP.

On the bottom line, the company continued to deliver strong margins with adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin of 39%, or $180 million in adjusted EBITDA. Adjusted earnings per share rose from $0.20 to $0.28, beating out the consensus at $0.26.

Several Wall Street analysts raised their price targets on the stock in the wake of the report, but it still sold off on the news, falling 8% over the next two sessions, a reflection of investor cautiousness.

Now what

The Trade Desk’s guidance for the third quarter was solid, calling for revenue of at least $485 million and adjusted EBITDA of around $185 million, but with a price-to-earnings ratio at 71, investors seem reluctant to bid it higher until the economy is on more solid ground.

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Jeremy Bowman has positions in The Trade Desk. The Motley Fool has positions in and recommends The Trade Desk. The Motley Fool has a disclosure policy.

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