The Trade Desk (TTD) is a digital advertising company operating in the United States and internationally.
The Trade Desk operates on the demand side of the industry, empowering advertisers and their ad agencies. The Trade Desk provides a cloud-based platform for advertising campaigns that span various mediums such as display, video, and connected television (CTV).
The Trade Desk stock is down more than 14% over the last three months. Inflation and interest rate concerns have sparked a sell-off of growth stocks.
This sell-off has deepened, and the Nasdaq is now in correction territory. It is difficult to predict when the market will begin to recover. When it does, The Trade Desk could be a big winner.
I am bullish on The Trade Desk stock.
The Trade Desk
How people consume media is changing. More and more people are cutting the cord and getting their television through the Internet, rather than through cable or satellite.
In addition, Video and Display advertising is also growing. Because of this, The Trade Desk’s services are in high demand. According to IDC, display advertising alone is a $50-billion market, although just a tiny part of the total $725-billion global advertising market.
The Trade Desk believes that a significant driver of growth will be the coveted CTV market. Advertisers that do not utilize CTV miss out on a substantial chunk of the population, including much of the younger demographic.
Younger people are much less likely to have cable or satellite television as most watch television through some type of streaming service. The Trade Desk reaches an audience of 120 million CTV devices, making it very attractive to advertisers.
Impressive Revenue Growth
Annual revenue for The Trade Desk reached $836 million in Fiscal Year 2020. This was a modest 26% increase over 2019.
The 2020 year was weighed down heavily by COVID-19. Many advertisers, especially in the travel and entertainment industry, held back advertising dollars.
This spending resumed in 2021. For the first nine months of 2021, The Trade Desk has already posted $800 million in revenue. This amounts to a 55% increase over the same period in 2020. The fourth quarter of 2021 is expected to be the best on record due to holiday advertising spending.
The Trade Desk is also GAAP profitable. The company has earned over $150 million in operating income through Q3 2021, up from $38 million for the same period in 2020.
While many high-growth companies are years away from portability, The Trade Desk is increasing margins. The operating margin for the first nine months of 2021 stands at nearly 19%. This is an increase from the company’s 7% operating margin for the same period in 2020. This profitability, combined with the growth, makes The Trade Desk an attractive growth company.
Wall Street’s Take
The Trade Desk holds a Strong Buy rating on TipRanks, based on 11 Buys and two Holds assigned over the past three months.
The average The Trade Desk price target of $102.50 suggests 63.6% upside potential.
Conclusion
Growth stocks have significantly corrected thus far in 2022. The Nasdaq is also in correction territory.
This results from stretched valuations, jittery investors, and macroeconomic fears. This can also create opportunities for investors.
The Trade Desk is rapidly growing in an expanding industry. The company is also growing rapidly and is GAAP profitable. The valuation is now more attractive than it has been recently. The market will eventually turn around, and when it does, The Trade Desk will be a top pick for investors.
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