Down 63% From Record Highs, Is TTD Stock a Buy?
July 04 2022 - 6:40AM
Finscreener.org
The Trade Desk (NASDAQ:
TTD) is a
California-based multinational
technology company that
provides end-to-end
real-time programmatic marketing automation technologies to
businesses to manage their ad campaigns.
Its programmatic ad sales do not
involve any human sales teams and instead are automated on a
self-service platform with the help of machine learning and AI
algorithms. Also, these ads are then sold through real-time
auctions conducted on the mobile application, website, or connected
TV platform.
Sounds impressive? It is. TTD is
one of the largest businesses in its space and was one of the
hottest performing stocks until the recent
sell-off.
TTD stock rose by a staggering
3,700% between September 2016 and November 2021. Its down over 60%
from all-time highs, valuing the company at $20.2 billion, by
market cap.
Considering the valuation at
which the stock is presently trading and the expected surge of
digital advertising, TTD seems like a bargain buy.
TTD will benefit from the widening market for digital
ads
The pandemic has accelerated the
shift towards digital ads. Most businesses are increasingly
shifting their spending to digital channels and spending
by global advertisers on
digital have been 22.5% higher last year. Further growth is
expected especially because streaming giants
Netflix (NASDAQ: NFLX)
and Disney+ (NYSE:
DIS) have decided to
launch the ad-supported versions of their streaming services later
this year.
Disney has stated that it will be
launching an ad-supported version of its streaming service
platform, Disney+, in the US by the end of 2022, and thereafter
internationally by 2023. The company already boasts of having
about
137.9 million customers
worldwide, and by 2024 the number
might reach between 230 million and 260 million. Similarly, Netflix
also has a similar plan although the company has not yet mentioned
a clear timeline for its ad-supported version.
These developments could benefit
TTD in a massive way. The company has already reached 120 million
connected TV devices in the US, and these incoming opportunities
would further help the company boost its revenues to a great
extent.
The Trade Desk and its competitive
advantages
TTD has some competitive
advantages. Firstly, the company’s business model is great. It does
not buy the ad inventory and then sell it to its clients but
instead charges a fee on the basis of the total advertising spent
over its platform. Moreover, its open platform can be customized as
per the customer’s convenience, allowing it to improve engagement
and retention.
Second, with the help of its new
platform called Solimar, the company will address the privacy updates
from Apple (NASDAQ: AAPL)
and Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL). Also, through the
Unified ID 2.0 solution
access to third-party cookies will
be prevented.
Finally, newer technologies like
the growing use of connected TVs and 5G wireless speeds will foster
the growth of data and the digital ad market, and eventually,
the
combined advertising
spending might lead to a
$1 trillion opportunity in the coming decade.
Growing Revenues
Despite the high levels of
inflation and bearish market trend, notable growth has been
observed in TTD’s
quarterly
revenues. The company
delivered its strongest first-quarter revenue growth in the last
four years in 2022 and its revenue of $315 million showed a 43%
year-over-year growth, compared to Q1 of 2021.
Its adjusted EBITDA rose by 38%
and the adjusted net income increased by $35 million translating to
adjusted diluted earnings per share of $0.21.
TTD is currently trading at $41.6
and the average analyst price target for the stock is $83.67 which
is a potential upside of over 100%, making it one of the top bets
for growth investors right now.
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