The Trade Desk: Smashing Expectations Since The IPO
- Since its IPO, TTD has been consistently performing above expectations with growth better than expected.
- Native spending and Connected TV are increasing, and TTD is poised to take advantage through its DSP/DMP platform.
- The shares trade at a fair price with plenty of upside potential on conservative growth estimates and modest analyst coverage.
With the bull market back in full swing since the 2016 election in November, growth stocks have outperformed the general market. To an even greater degree, tech growth has proved extremely strong with names like Square (SQ), Nvidia (NVDA), and Shopify (SHOP) making strong new highs in a changing paradigm. A lesser known of these super growth names is The Trade Desk (NASDAQ:TTD) which provides a platform for advertisers to buy ads. The shift to online and digital advertising such as mobile ads has been staggering with TTD increasing mobile video over 200% from Q1 2016 to 2017. Think Facebook (FB) or Twitter (TWTR)) ads and how large the growth in this area will be the next several years. One of the keys of these two social media giants is Native advertising. This is when the advertisements are the type that doesn’t appear to be at first glance such as those in your Facebook news feed. The Trade Desk launched its Native platform in Q2 2016 and managed to beat all of 2016’s native spend alone in Q1 2017. TTD is continuing to aggressively grow in this area with Native video and content partnerships.
TTD has the size advantage and the platform advantages to dominate in these growing areas. The Data management platform TTD has is advanced, allowing the advertiser to break down audiences and their trends. This is a base product as part of the great demand platform, which gives those advertisers a huge edge in using The Trade Desk. It has made the investments for 2017 and far beyond which will pay great dividends for its shareholders. The advantages TTD has over many of its competitors in the space have given it a tremendous amount of growth with revenue increasing from $113.8M in 2015 to $202.9M for 2016. TTD has provided conservative guidance of $291M for the full year which would be less than 50% growth even though it has grown at least 70% the last four quarters. Also, important to keep in mind is that TTD is a very profitable company unlike many in this stage of growth. TTD managed an adjusted EBITDA of 32% for 2016 and an impressive 0.89 cents adjusted EPS. TTD is still a revenue growth story, but management has proved that it is able to operate profitably which is something important to see from a recent IPO such as this.
The Trade Desk has also been growing its connected TV portion at a phenomenal rate. Think Hulu, Sling, or CBS All Access. Connected TV is part of the future with cord cutting becoming the standard. It grew CTV revenue 300% in Q1 2017 over Q1 2016. As noted by CEO Jeff Green on the last CC:
The massive adoption of ad-funded connected TV takes time, but we are forming the partnerships and making the investments needed to win in the long-term. Because of the sheer size of the market, about half of the $650 billion worldwide advertising market, TV can move the needle unlike any of our other channels.
From a technical perspective, TTD has consolidated nicely, recently regaining its 50-day moving average after briefly losing it in early July. It is setting up another good move off of that support with another good Q2 earnings report. Also, while the IPO was recent, many institutional investors continue to pry shares away from insiders in follow-on offerings. This increased float will continue to increase the stability of the share price. I suggest buying TTD before its next earnings report comes early August. Technically stable and with lots of positive momentum, this is a forgotten name among growth-oriented investors. So, while the way we consume media continues to change, TTD continues to be at the forefront of the movement in advertising. The future of media is here, and TTD will take full advantage of it.
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Analyst’s Disclosure: I am/we are long TTD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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