Is Triple-Digit Growth Ahead For Digital Ad Platform Trade Desk?

Key Points

• Third-quarter earnings came in ahead of estimates, but the current-quarter revenue forecast fell below expectations.
• The company cited strong growth in its Internet TV business and said customer retention remained over 95% during the third quarter.
• The consensus price target is $81.29, representing a potential upside of 103.80% in the next 12 to 18 months. 

 

 

Ever wonder how those commercials on your streaming services, like Hulu, seem to know a lot about you? Companies like online ad platform The Trade Desk (NASDAQ: TTD) are one of the parties behind this narrow targeting. 

The Ventura, California company has been profitable since going public in 2016. Early Wednesday, it reported third-quarter earnings that came in ahead of estimates, but that wasn’t enough to give the stock a boost for the day. 

Shares closed at $39.89, down $3.48, or 8.02%. It was a frustrating day for investors in the stock or those who bought early in the season. The stock gapped up 8.72% at the open, then sold off largely in tandem with the broader market. 

In addition, revenue guidance fell below views. 

In the quarter, the company earned $0.26 per share, up 44% from the year-ago quarter. Revenue was up 31% to $395 million. Those results topped analyst estimates. Wall Street was expecting a net income of $0.23 per share on revenue of $386.2 million.

As you’ll see using MarketBeat earnings and revenue data, The Trade Desk has an uneven history of meeting, beating, or missing views in recent quarters. 

In its earnings release, the company cited strong growth in its Internet TV business. It also said that “customer retention remained over 95% during the third quarter, as it has for the past eight consecutive years.”

Outlook Falls Below Estimates

For the current quarter, the company forecasts sales of $490 million, the midpoint of its range. That fell below analysts’ estimates.

The company has been able to keep its client's spending on digital ads, despite the threat of recession. In the report, it specifically mentioned one large advertiser, referencing Unified ID 2.0, an industry-wide technology that captures relevant user data while also protecting privacy. 

“Procter & Gamble, one of the world's largest advertisers, announced its support and adoption of UID2. P&G noted the urgency for advertisers and publishers to implement a consumer-centric identity solution that will raise the bar on privacy and improve consumers' experiences with advertising,” said the company. 

The Trade Desk’s business model is to provide a technology platform for buyers of advertising. Its cloud-based platform allows buyers to manage and optimize their data ad campaigns across channels including video, audio, in-app, display, social media, and others on various devices. Advertisers can buy and manage ads in real-time, an advantage that allows clients to respond to current situations. 

The company has a market capitalization of $19.48 billion, putting it in the large-cap territory, but too small to be tracked by the S&P 500. 

Double- And Triple-Digit Growth 

Its earnings and revenue growth track record are robust. In the past eight quarters, revenue grew at rates between 24% and 101%. Earnings grew between 11% and 147% during that time. 

Wall Street is eyeing earnings of $1.01 per share for the full year, up 11% over 2021. Next year, that’s rising another 15% to $1.16 per share.

MarketBeat analyst data show a “moderate-buy” rating on the stock. The consensus price target is $81.29, representing a potential upside of 103.80% in the next 12 to 18 months. 

The Trade Desk is showing declines in the following time frames:

• 1 month: -23.63%
• 6 months: -21.10%
• Year-to-date: -52.67%

Even with those declines, the stock’s solid fundamental growth still makes it a promising one to watch. Digital advertising isn’t going anywhere. Even if advertisers tighten the purse strings during a recession, spending will continue. Some smaller advertisers may even be able to drive bargains if the bigger corporations cut budgets. All this means this appears to be a strong performer in an industry that’s almost certain to continue growing.