Shares of advertising technology (adtech) company The Trade Desk (TTD 2.27%) tumbled this week after another adtech player reported dismal results. The S&P 500 was also down this week, putting additional pressure on The Trade Desk stock. As of 9 a.m. ET on Friday, The Trade Desk stock was down almost 11% for the week.
Adtech fears intensify
On Tuesday, Snap reported financial results for its third quarter of 2023, sending the publicly traded adtech world into a tailspin. The company generates revenue from ads and it reported growth in ad impressions. But the effective cost per mille (eCPM) — how much it gets per thousand ad impressions — dropped 5% year over year, suggesting that advertisers are reluctant to spend money. This is why the entire adtech space dropped this week, including The Trade Desk, and not just Snap stock.
Stock market conditions also weren’t favorable for The Trade Desk stock this week. On Thursday, it was reported that U.S. GDP grew faster than expected in the third quarter. And while that might sound good on the surface, it has indirect implications for the stock market.
The market is worried that the Federal Reserve might raise interest rates again because GDP is still growing faster than expected. If interest rates go up, lower-risk investments — including certificates of deposit (CDs) — become more attractive. Riskier growth stocks like The Trade Desk consequently are seen in a less attractive light, and it contributed to its drop this week.
Same song, different verse?
The correlation between Snap’s financial report and The Trade Desk stock is becoming a quarterly stock market tradition. However, The Trade Desk stock has pleasantly surprised investors when it’s eventually delivered its own financial report in the past. One has to wonder if it’s set up to outperform expectations once more when it reports on Nov. 9.
That said, investors do need to remain aware of stock market conditions. Interest rates have an impact on stock valuations and The Trade Desk stock is one of the pricier ones. It’s lived up to its expensive price tag in the past but it will need to keep living up to expectations going forward.
Jon Quast has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends The Trade Desk. The Motley Fool has a disclosure policy.