The Trade Desk Raised Forecasts Means Ad Spending is Back, Maybe

Key Points

• The Trade Desk is a leading buy-side programmatic advertising platform provider operating as a one-stop shop for advertisers to automate, analyze and optimize their ad spending and marketing campaigns.
• The Trade Desk affirms that connected TV (CTV) is the fastest-growing advertising channel, driven by free ad-supported digital video ads and social media ad spending.
• The Trade Desk beat Q1 2024 EPS consensus estimates by 26 cents as revenues rose 28.3% YoY and raised its Q2 2024 top and bottom line guidance.

The Trade Desk Inc. NASDAQ: TTD is one of the largest artificial intelligence (AI) powered demand-side programmatic advertising platform providers in the computer and technology sector. Demand-side platforms help ad buyers automate and optimize their media buying and marketing campaigns.

Many analysts use The Trade Desk as a barometer of the advertising market. A strong advertising market can also imply strong consumer spending demand and vice versa. The Trade Desk reported strong Q1 2024 earnings as revenues surged 28.3% YoY. They even raised their forward guidance. This should be undeniable proof that the advertising market is back. However, that is not the case for everyone.

The Haves and the Have Nots

There is constant debate as to whether the ad spending market is back or not. Social media platforms like Snap Inc. NYSE: SNAP, Pinterest Inc. NYSE: PINS and Alphabet Inc. NASDAQ: GOOGL all experienced double-digit ad growth, indicating digital ad spending is rebounding strongly.

However, many of the media companies and content providers say otherwise. Media and entertainment giant Warner Bros. Discovery Inc. NASDAQ: WBD saw advertising revenues slump 7% in its first quarter of 2024. So which is it?

Social Media and Video Ads are Strong

The reality is that while ad spending is back, it’s just not back for everyone. This was the point made by digital advertising verification service DoubleVerify Holdings Inc. NYSE: DV. According to DoubleVerify, social media ad spending and video ads are seeing the strongest inflows. However, they also added that large advertiser spending is inconsistent. Inconsistent enough to cut its forecasts, which also resulted in a 39% collapse in its shares.

The Trade Desk’s Wheelhouse: CTV

Who benefits from social media and video ad spending? The Trade Desk, since they are a buy-side programmatic ad platform, offers its AI-powered Kokai platform. The Trade Desk has the largest CTV inventory marketplace in the industry. Additionally, connected TV (CTV) is the fastest-growing ad channel, according to The Trade Desk.

CTV is programming that happens over internet-connected hardware, including smart TVs, Roku Inc. NASDAQ: ROKU, Amazon.com Inc. NASDAQ: AMZN Fire TV, Google Chromecast, Sony Co. NYSE: SNE PlayStation consoles and Apple Inc. NASDAQ: AAPL Apple TV devices. CTV has led to the rise of free ad-supported streaming channels and content, which is also the driving force behind the strength of digital video ads. 

The Trade Desk CEO Jeff Green underscored its competitive advantage, “To put a finer point on this, more than 90% of the Ad Age Top 200, the largest 200 advertisers in the world, have run advertising campaigns on our platform over the last 12 months. Even with its considerable size, CTV continues to be our fastest-growing channel.”

The Trade Desk competes with programmatic ad tech companies like Magnite Inc. NASDAQ: MGNI and sell-side platform PubMatic Inc. NASDAQ: PUBM, which helps content providers sell ad inventory.

Daily Ascending Triangle Pattern

TTD is forming a daily ascending triangle pattern. The ascending trendline started at the $76.17 swing low on April 22, 2024, indicating higher lows on pullbacks. The flat-top upper trendline resistance formed at $87.68. TTD attempted a breakout on May 2, 2024, but shares peaked at $92.19 and fell back into the triangle. TTD attempted another breakout on its Q1 2024 earnings release but peaked again at $90 as shares fell back into the triangle range. A resolution is imminent as TTD trades closer to the apex point. The daily relative strength index (RSI) is flat around the 54-band. Pullback support levels are at $82.85, $77.91, $73.91 and $66.56.

Robust Growth is Back

The Trade Desk reported Q1 2024 EPS of 26 cents, beating consensus analyst estimates by 4 cents. Adjusted EBITDA rose 49% YoY. Revenues surged 28.3% YoY to $491.25 million, beating $480 million consensus estimates. The company bought back $125 million in stock in the quarter leaving $575 million left of its buyback authorization. The Trade Desk closed the quarter with $918 million in cash and cash equivalents. Customer retention remained over 95%, which is a decade-long streak.

Growing its Inventory

The Trade Desk announced a number of expanded CTV inventory from content providers. The Walt Disney Co. NYSE: DIS expanded its partnership with The Trade Desk with Disney's Real-Time Ad Exchange (DRAX) with direct integration with The Trade Desk's OpenPath. Comcast Co. NASDAQ: CMCSA owned NBC Universal will offer its 2024 Paris Olympic Games inventory on Peacock via The Trade Desk. Roku will enable advertisers to use The Trade Desk to leverage Roku Media and audience behavioral data to optimize their ad campaigns.

Raised Guidance

The Trade Desk raised its guidance for Q2 2024 with revenues of at least $575 million, beating $566.83 million consensus estimates indicating a 22% YoY growth. The company raised its adjusted EBITDA to nearly $223 million, indicating 38% QoQ growth.

The Trade Desk analyst ratings and price targets are at MarketBeat.