Categories Analysis, Technology

After COVID era, what the future holds for Trade Desk (TTD)

Trade Desk is well-positioned to take advantage of its strong presence in the connected TV space and the rebound in ad spending

Advertising and related businesses were among the first to fall on the receiving end of the spending cuts the business world witnessed during the COVID period. But things changed for the better for ad-tech companies like Trade Desk, Inc. (NASDAQ: TTD) when the consumption of television and streaming content spiked after the shelter-in-place orders came into place.

Read management/analysts’ comments on quarterly earnings

The market value of the California-based tech firm, which provides software for digital advertising campaigns, nearly tripled last year making it one of the fastest-growing Wall Street companies. The stock peaked a few months ago, but pulled back and maintained the downtrend since then. Experts see a further decline, which calls for caution from an investment perspective. While TTD is trading at a high premium, investors would consider using the recent dip in valuation as an entry point.

Recovery Hopes

The recovery in television advertising in the final months of last year, probably marking the end of the weak phase, bodes well for Trade Desk. The company’s innovative ad-tracking platform assumes significance considering the uncertainty that prompts customers to focus on campaigns that offer assured return on investment. Also, the spike in the consumption of streaming content during the pandemic has brought fresh vigor to the advertising business. The company looks poised to continue to take advantage of its clout in the connected TV space, and maintain the market-leading position in the rapidly evolving ad-tech industry.

From Trade Desk’s Q3 2020 Earnings Conference Call:

“Brands and agencies that advertise more effectively, who leverage data to be more nimble and agile are gaining share, period. In 2020, almost every marketer and every large brand are being asked to do more with less. Every advertising dollar has to be accounted for. CFOs are more involved in marketing and advertising decisions than they’ve been in years. They become a lot more focused on what business value is created by advertising. And that means that advertisers have to focus on ad opportunities that are measurable and comparable, where the business ROI can be understood and proven.”

Positive View

Unified ID 2.0, an open-source alternative to third-party cookies launched by the company, has been hailed by analysts widely and well-received by the market for the innovative concept. Market watchers are also bullish about Trade Desk’s finances this year, with the earnings estimate undergoing multiple upward revisions in the past 30 days. It is estimated that global advertising spend would grow sharply in the next few years, with a major share of it shifting to digital formats. Of late, media platforms have been striving to safeguard user privacy through measures like the scrapping of activity tracking, a trend that aligns with Trade Desk’s business model.

Topline Rebounds

The company has beaten analysts’ earnings estimates consistently in recent years, and it was no different in the most recent quarter. A rebound in ad spends pushed up revenues by 32% to $216 million in the third quarter, marking an improvement from the contraction seen in the prior quarter. The solid top-line growth translated into a 69% growth in adjusted earnings to $1.27 per share. The positive outcome and the management’s bullish guidance for the final months of the year spurred a stock rally.

Can Netflix hold its ground as the streaming space gets crowded?

After staying on the growth path for a long time, Trade Desk’s stock entered 2021 on a low note. The shares have lost 19% since mid-December when they reached an all-time high.

Looking for more insights?

Read the full conference call transcript here. It’s free!

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