Can The Trade Desk Rebound From Google’s Cookie Policy?

Shares of digital media buying platform The Trade Desk NASDAQ: TTD remain off December highs, but rallied back last week. The stock closed Friday at $751.22.

The Trade Desk plunged 12.75% on March 3. The retreat followed Google’s NASDAQ: GOOGL announcement that it would not only halt the use of cookies to track ads, but it would not offer an alternative technology to track Web users.

The Trade Desk operates a platform to run advertising campaigns across a number of digital platforms. Its revenue model is taking a cut of the ad spending.

Tracking user behavior with cookies is a key part of the ad business.

Google’s elimination of cookies was expected, as big tech is under fire from regulators to enhance privacy controls.

However, as Google makes it more difficult for advertisers to develop replacement tracking technologies, other companies in the ad-targeting business are taking a hit.

Criteo (NASDAQ: CRTO) and Magnite NASDAQ: MGNI also skidded in early March on Google’s news.

Growth In Connected TV

The situation isn’t necessarily dire for The Trade Desk, though. Although cookies have been crucial to the growth of usage tracking on Web browsers, they are not so central to the next generation of ad platforms. One such up-and-comer is Connected TV, known as CTV, which relies on log-in data, not cookies, for ad targeting.

The Trade Desk has been ramping up its capabilities in the area of CTV, which is expected to grow rapidly. It also launched an ad-tracking technology called Unified ID, which doesn’t use cookies.

Stock charts tell a story of a company’s fortunes, and that’s been abundantly clear with The Trade Desk.

After the market-wide plummet last March, shares of The Trade Desk rocketed back with a vengeance in April, as the market realized digital media companies would emerge as leaders during the pandemic, as brick-and-mortar businesses closed.

Advertisers Slashed Spending

However, there was a flip side to that narrative for The Trade Desk. Especially in the early months of the pandemic, advertisers,  uncertain how the economic downturn would affect their revenue, throttled back on their spending,

Those reductions showed in the quarter ending in June 2020, as both revenue and earnings flashed year-over-year dips.

As advertisers regrouped and began spending more to reach consumers who were suddenly online all the time, The Trade Desk’s sales and earnings growth recovered well in the quarter ending in September 2020.

The company reported its fourth-quarter in February. Earnings per share came in at $3.71, up 149% from the year-earlier quarter. Revenue was $319.9 million, a gain of 48%.

Growth engines have been ad placements on streaming channels such as Roku NASDAQ: ROKU, Amazon NASDAQ: AMZN Prime and Walt Disney NYSE: DIS.

The Trade Desk did not issue guidance for 2021, which worried investors. The stock began correcting immediately after the earnings report. It gapped down 6.4% on February 23, to $791.09.

Eight-Month Rally

A stock’s chart tells a story, and The Trade Desk’s story is an easy one to read.

On the heels of the April 2020 rally, the stock rallied for eight months. Part of the momentum was due to the broad market uptrend, part was due to excitement about tech in general, and part was due to optimism about the company’s own fortunes.

The rally broke down somewhat, starting in December, but until Google’s announcement, the stock was holding up well near its 10-week moving average.

It formed a cup with handle, and cleared that consolidation in heavy volume on February 19, before quickly reversing lower as investors digested the earnings report.

That pullback resulted in the cup-with-handle pattern breaking down, and the stock may now be forming a  double-bottom base. It’s been rallying from its March 5 structure low of $561.02.

If the stock continues trending higher, watch for it to clear resistance above $921.12, preferably in heavier-than-normal turnover. Heavy trading volume is an indication that institutional investors are stepping in to support a stock.