PreMarket Prep Stock Of The Day: Trade Desk

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

One unique aspect of the PreMarket Prep Show is the ability to follow the price action immediately following breaking news. During Monday’s show, Trade Desk Inc. TTD fell out of bed during the broadcast.

Weak Ahead Of Q1 Report: Trade Desk made its all-time high in February ($921.12) and has been out of favor with the other growth issues and any rebound has met with major sellers. Until Monday’s price action, the low of the retreat was capped at its March 5 low ($561.02).

In Friday’s session, the issue was able to end a seven-day losing streak (falling from its April 27 close of $748.52 to $612.30 on Thursday). The relief rally got back some of its prior losses
ending the week at $661.43.

The Old Good News Good News, Bad News Trick: Ahead of its report at 8:32 a.m. ET, due out this morning, the company announced a 10-for-1 stock split to be effective June 17. As expected the news bots seized on the favorable news taking the issue over $50 higher in premarket trading at $712.25.

Seconds later the company kept the good news coming when it reported quarterly earnings of $1.41 per share, which beat the analyst consensus estimate of $0.71, along with a sales of $219.81 million.

However, the company then dropped a bomb on the aggressive buyers when the company disclosed it was “facing a period of higher uncertainty in its business outlook.” Certainly words not favorable for a growth issue trading at a high forward price to earnings ratio of 147 based on Friday's closing price.

Free Falling: Immediately, all of the aggressive buyers turned into super-aggressive sellers and the issue shed over $140 before the opening bell. Along the way, the hosts of the show identified potential support levels to no avail. That was primarily based on the 10-for-1 stock split, but once the weak guidance was revealed, it may be best to get out of the way of the spiraling issue.

Following a huge down open at $567.42, the issue only managed a $0.17 bounce to $567.89 before another waver of sellers engulfed the issue. It has continued to make new lows for the session with the current being $484.27 as of 2:50 p.m. That low comes in well below its prior lows from October ($526.01) and  September($495.01).

Moving Forward: First of all, it's often not prudent to try and catch a falling knife on the first day of a major sell-off for several reasons. The primary one being, more passive investors will note Monday’s price action and decide to exit the issue on Tuesday or on any sudden rebound.

Lesson Learned: When a company is scheduled to report earnings, perhaps wait to act on the report or guidance as opposed to reacting to the news of a stock split.

The play-by-play action on the issue from Monday’s show can be found here. Additional commentary can be found at the 59-minute 38-second mark of the broadcast.