The Trade Desk (TTD) is a well-known brand and clear leader in the digital advertising software market.
The company’s continual technological advancements and innovations have resulted in substantial revenue growth in recent quarters. In addition, the company’s scalable and frictionless business strategy has enabled it to achieve strong profit margins.
Further, Trade Desk’s cloud-based advertising platform should continue to gain immense popularity in the near future due to the tremendous change from conventional media to digital media. With worldwide digital ad expenditure expected to exceed $455.3 billion by the end of this year, The Trade Desk is ideally positioned to take advantage of this potential.
Trade Desk’s stock is also up approximately 19.8% over the past year and 14.6% on a year-to-date basis.
Strong Q3 Results & Encouraging Guidance
Trade Desk recently released its Q3 earnings, which delighted investors, resulting in a 30% increase in the stock price.
Both the top and bottom lines of the company continued to rise strongly. Revenues climbed by 39% year-over-year, while non-GAAP earnings per share increased by 38.5%.
Furthermore, the firm maintained a customer retention rate of over 95% in Q3. In addition, spending on connected television (CTV) remained robust in Q3, indicating that the company should continue to be lucrative.
The strong balance sheet of The Trade Desk is another plus that should not be overlooked. At the conclusion of Q3, the firm had a cash balance of $798.6 million (including short-term investments). Better working capital management resulted in $129.7 million in cash from operations and $104.3 million in free cash flow generation.
To top it off, The Trade Desk expects sales growth to be in the double digits in the fourth quarter, with revenues of at least $388 million, up 22% year-over-year and slightly higher than the $387 million consensus projection.
While The Trade Desk’s fundamental business is strong, the company’s continuous focus on increasing its footprint in the burgeoning digital ad industry through new services and product development should help it grow even more.
Wall Street’s Take
Susquehanna analyst Shyam Patil is bullish on Trade Desk. Patil remains impressed with the company’s Q3 results and believes the strong guidance displays the company’s outstanding execution.
Further, Patil believes that Trade Desk is a multi-year growth story with a number of key growth drivers.
As a result, Patil maintained his Buy rating on The Trade Desk and increased its price target to $115 from $105 (29.7% upside potential).
Along with Patil, the majority of the Street is also bullish on TTD, with a Strong Buy consensus rating, based on 11 Buys and three Holds. Furthermore, Trade Desk scores a “Perfect 10” on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.
The average The Trade Desk price target of $97.92 implies 10.4% upside potential to current levels.
Disclosure: At the time of publication, Shalu Saraf did not have a position in any of the securities mentioned in this article.
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