Earnings Preview: The Trade Desk expected to continue the momentum in Q2

The Trade Desk (NASDAQ: TTD) has been having a dream run in the bourses this year with the stock surging 115%. The ad-buying platform also touched a new 52-week high of $279 mark last month.

Thanks to solid performance, the stock price has skyrocketed above 400% since April 2018 reflecting the bullishness from the street. Amidst high expectations, The Trade Desk is slated to report its second quarter earnings on August 8 after the bell.

Headline Numbers

Last quarter, the company has guided second quarter revenue of $154 million, just shy of $155.6 million anticipated by the street. The Trade Desk expects 25% jump in adjusted EBITDA. Analysts are expecting adjusted EPS of 69 cents compared to 60 cents reported last year.

For the full-year period, the digital ad platform lifted the sales outlook to $645 million from the prior guidance of $637 million. Adjusted EBITDA has been increased from $182 million to $188.5 million due to improved tailwinds from its customers.

When it comes to analyst consensus revenue is expected to increase 36% to $649.5 million while adjusted earnings to come in at $2.89 per share, up 7% over prior year. It would be interesting to see whether the company is able to continue the momentum for the first quarter.

Looking Back

First quarter results topped estimates with the revenue increasing 41% while the adjusted EPS soared 44% due to increased spend from the clients. Customer retention rate stood above 95% continuing its strong track record. The company’s focus on offering omnichannel offerings to the clients has been well received and expected to bring strong growth in the near future.

Last quarter, mobile video and in-app spending surged 60% over prior year. However, the highlight in the first quarter’s performance was the emerging channels Connected TV and audio which reported stellar growth of 3x and over 270% compared to last year. Analysts would be expecting the channels growth to continue into the second quarter.

The Trade Desk launched its programmatic buying platform in China last quarter. Even though initially the company might be in investment mode, one can expect long-term sustainable growth which would be accretive to earnings in the near future.

Bottom Line

Since programmatic ad buying brings in majority of revenues to the platform, the company needs to ensure it is able to sustain the momentum from the last quarter.

Since the market is still in nascent stage, investors would be expecting more customers to get comfortable with programmatic buying in the long-term, resulting in sustainable revenue growth.

Given the high valuations commanded by The Trade Desk, it’s inevitable for the firm to deliver the goods to justify the expectations.

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