Down 30% from Record Highs, Is TTD Stock a Buy?
Several technology stocks have
been hit hard in the last few months as investors were worried
about rising inflation rates, the threat of higher interest rates,
steep valuations, and a new wave of infections due to the Omicron
variant. The Trade Desk (NASDAQ:
TTD) is a high-flying
tech stock that has surged 2,500% since its IPO in 2016. But its
also down 31% from all-time highs allowing you to buy the
Let’s see why TTD stock is a
solid long-term bet at current prices.
An overview of The Trade Desk
Valued at a market cap of $37
billion, The Trade Desk
operates a cloud-based
marketers to create, manage and optimize data-driven digital ad
campaigns in various ad formats devices, and channels.
Additionally, it also provides you with data and value-added
services and platform features.
Traditionally companies have
acquired advertising space manually after negotiating with
publishers making it a time-consuming, costly, and inefficient
process. Marketers had limited flexibility to target content and it
was impossible to optimize ad campaigns too.
TTD has gained traction in the
programmatic ad space allowing participants to bid on advertising
inventory. It has successfully focused on the buy-side of the
digital ad segment working with advertisers instead of publishers.
So, now marketers can accelerate their decision-making process and
support their future plans based on data by paying for ad
impressions that can reach the target audience.
Why TTD stock is a buy
In 2020, the TTD platform saw
over $4.2 billion in ad spending on its platform allowing it to
generate $836 million in sales. The Trade Desk enjoys a high
customer retention rate that stands at 95% for the seventh year in
a row, which should result in incremental revenue over
In the last 12-months, TTD sales
rose by 53% year over year to $1.1 billion on the back of rising
revenue from the connected TV space. Its free cash flow more than
doubled to $317 million as well.
TTD is well poised to benefit
from multiple secular tailwinds that include a rapidly expanding
addressable market. For example, programmatic ad spending is
forecast to rise by 20% to $155 billion in 2021, providing The
Trade Desk with enough room to increase sales in the upcoming
The cord-cutting phenomenon
should act as another key driver for TTD which will drive digital
ad spending significantly higher by the end of the current decade.
The Trade Desk is also bullish on CTV to drive top-line higher in
addition to the growing adoption of social media, mobile, and video
report from eMarketer
estimates CTV ad spending in the
U.S. to touch $30 billion by 2024, up from $14.44 billion in 2021.
It suggests CTV will account for 7.4% of total media spending in
2024, up from 4.7% in 2021.
At the end of Q2, TTD services
have reached over 120 million CTV devices in the U.S., in addition
to 87 million households.
What next for TTD stock?
The Trade Desk continues to
expand its suite of products and solutions. It recently launched
the Solimar platform where ad buyers can create campaigns on the
basis of first-party data. TTD also partnered with
Walmart (NYSE: WMT)
to develop a new demand-side platform. The partnership will allow
The Trade Desk to gain access to first-part data of the retail
Analysts expect the company to report sales of $1.19 billion in sales in
2021 and revenue is forecast to increase by 30% to $1.55 billion in
2020. This will allow The Trade Desk to expand adjusted net income
from $0.69 per share in 2020 to $0.91 per share in 2022.
We can see that TTD stock is
valued at a forward price to sales multiple of 24x and a price to
earnings multiple of over 80x which is steep. However, Wall Street
expects TTD stock to gain around 30% in the next
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