Trade Desk, Inc. (NASDAQ: TTD) has remained a much sought-after demand-side platform despite challenging market conditions and growing inflationary pressure, but its stock suffered heavy selling in recent months. The advertising technology firm offers what is probably the world’s most advanced data marketplace. Currently, it is looking to leverage the rapid shift to data-driven advertising.
The market value of the company, which offers an online platform for managing advertising across multiple mediums, nearly halved in the past six months — investor sentiment did not improve despite the company reporting positive quarterly results. The good thing about the dip is that the stock has become affordable to many prospective investors.
Read management/analysts’ comments on quarterly reports
The valuation is not very cheap but the high quality of the business justifies that. The stock offers a rare buying opportunity right now. It is widely expected that the shares would bounce back to where they were at the beginning of the year. Many experts recommend buying TTD and holding it forever, thanks to its bright prospects.
Growth Drivers
Innovations and frequent upgrades to the platform, like the recent launch of OpenPath solution that provides advertisers direct access to premium publisher inventory, are expected to attract more customers in the coming years. The proliferation of connected TV and streaming devices will be a key contributor to the company’s future growth.
Moreover, competitors would find it difficult to catch up with Trade Desk due to its disruptive business model. That positions the company to tap into pandemic-driven tailwinds like the spike in the consumption of streaming content and widespread digital adoption.
Macro Risks
While the management looks on track to meet growth goals, geopolitical uncertainties and rising interest rates could play spoilsport. The high stock-based compensation makes Trade Desk vulnerable to macroeconomic risks. However, the company’s relatively small presence in Europe limits exposure to the Ukraine war. Also, given its strong fundamentals, the stock would bounce back as inflation pressures ease.
From Trade Desk’s Q1 2022 earnings conference call:
“As the ecosystem continues to evolve and move away from walled gardens, led by CTV, we will unleash the power of programmatic for our advertisers and for our publisher partners. It will be an improved experience for everyone, consumers included. The innovations we are driving to help accomplish this are already delivering performance improvements for us today.”
Bullish View
Trade Desk claims it registered a customer retention rate of 95% in the early months of the current fiscal year, which can be linked to the recent expansion of important partnerships like the new integration with Adobe Real-Time CDP. After achieving 43% growth in the first quarter, the company sees a sequential increase in revenues in the current quarter. Net income, excluding one-off items, increased to $0.21 per share from $0.14 per share in the same period of last year.
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TTD traded slightly higher on Tuesday afternoon, after closing the previous session sharply lower. The current value is down 57% from the record highs seen in November last year.