Why The Trade Desk Stock Soared After Earnings

The Trade Desk (NASDAQ: TTD) stock jumped after the company reported earnings last night, and is already up 24.1% through 9:45 a.m. ET.

Analysts expected the ad-buying company to earn about $0.25 per share on $575.3 million in sales in the first quarter, but The Trade Desk actually earned $0.33 on sales of $616 million.

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The Trade Desk Q1 earnings

Revenue grew 25% year over year, earnings per share were up 67%, and CEO Jeff Green promised "to continue to outpace the market" going forward despite "increased macro volatility to start the year."

That's the good news. The bad news is that the $0.33 profit The Trade Desk reported was a non-GAAP (adjusted) number. Actual earnings as calculated according to generally accepted accounting principles (GAAP) were only $0.10 per share -- still a big improvement year over year, but about 70% smaller than the headline figure that so thrilled analysts today.

More important perhaps is the company noting that it retained more than 95% of its customers -- just "as it has for the past eleven consecutive years," and despite the economic turmoil of President Donald Trump's tariffs.

Is The Trade Desk stock a buy?

That's not to say The Trade Desk is entirely unaffected by the broader economy. Turning to guidance, management forecast sales of only $682 million in Q2, which is more than analysts expected (good news) but represents a slowdown in sales growth to just 16.6% (bad news).

And a sales growth rate of 16.6%, even if earnings growth is better, may not be enough to sustain The Trade Desk's nosebleed 89-times-earnings valuation.

Long story short, it was a fantastic quarter, and the stock is doing well -- but it may be time to sell The Trade Desk stock.

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Rich Smith 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.