Why The Trade Desk Stock Skyrocketed on Thursday
Key Points
An insider bought a sizeable chunk of The Trade Desk stock.
Reports emerged of a potential groundbreaking partnership.
This double dose of good news sent The Trade Desk stock soaring.
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Shares of The Trade Desk (NASDAQ: TTD) stock roared out of the gate on Thursday, spiking as much as 30.7%. As of 10:56 a.m. ET, the stock was still up 18.4%.
The catalyst that sent the adtech specialist higher was a combination of insider buying and a potential groundbreaking partnership.
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A potential turnaround?
The first bit of good news was a report that The Trade Desk had held talks with OpenAI regarding a strategic partnership. The artificial intelligence (AI) start-up is looking to expand into advertising, relying on partnerships to place its ads. The Trade Desk was named as one of its potential partners.
The second bit of good news was a record-breaking stock purchase by CEO Jeff Green. The chief executive bought 6 million shares of The Trade Desk stock at prices ranging between $23.49 and $25.08, according to a regulatory filing. That puts the value of the new stake at more than $151 million. This adds to Green's already sizable holdings. As recently as last year, he owned roughly 47 million shares, or roughly 48% of the company, putting his total stake at roughly $1.3 billion.
There's an old Wall Street adage that suggests that while there are plenty of reasons to sell a stock, there's only one reason to buy -- the belief that the stock will rise from here.
The Trade Desk stock has been pummeled recently as investors grew concerned about decelerating growth and the possibility that AI is having a negative impact on its adtech business. These fears have weighed on the stock, sending shares down 63% over the past year and 72% from their peak in July.
News of Green's purchase represented a big vote of confidence, as did the report that The Trade Desk could partner with OpenAI -- and confidence is something investors have been sorely lacking of late. The company's revenue growth has decelerated in each of the past five quarters, and shareholders had begun to wonder if The Trade Desk's best days were behind it.
The stock was recently trading for roughly 26 times earnings, its lowest valuation ever. Green obviously thought The Trade Desk stock was a bargain, and given his keen insight into the company, he's probably not wrong.
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Danny Vena, CPA 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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