Is The Trade Desk a Screaming Buy Now?

With the Nasdaq index starting the year down 14%, we’re in the midst of a tech stock sell-off. But, this also presents wise investors with the opportunity to get their hands on tech stocks on the cheap.

The Trade Desk (TTD) is a global technology company specializing in real-the programmatic marketing automation via technologies, products, and services. The Trade Desk delivers personalized digital content to its customers and is the biggest independent demand-side platform on the planet. Its competitors include Google Ads and Facebook Ads.

Demand-side platforms, known as DSP for short, refer to a way that empowers digital ad buyers to manage multiple exchange accounts via one interface. 

Programmatic marketing is operated by real-time — and often, split-second — decisions that are based on things like:

• User identity and demographics
• User interests
• Purchase intent
• Device information
• Other data points

These data points help programmatic marketing deliver personalized experiences for the consumer while also improving the ROI for advertisers and other companies who deploy it. 

How The Trade Desk Works

The Trade Desk and other demand-side platforms are able to offer these custom-fit digital experiences through partnerships with ad exchanges.

The Trade Desk takes programmatic marketing automation to the next level by using an omnichannel approach that includes:

• Strong data analytics.
• Fast response times.
• Support for a wide array of connected devices, platforms, and media formats.

In 2021, TTD added new features, including:

• A self-service publishing platform for brands and advertisers.
• A data management platform providing advanced analytics and segmentation.
• Enterprise APIs that facilitate advanced integrations.

The company employs more than 2,000 people in 25 global locations. Its customers include:

• Spotify
• BBC.com
• Business Insider
• Expedia
• Fox Networks
• Fox News
• Kayak
• Major League Baseball (MLB)
• NBCUniversal
• TikTok
• Pandora
• Vice
• Vox Media
• The Wall Street Journal
• USA Today

TTD uses AI and machine learning to help advertisers reach their target audiences. Then, it connects advertisers with companies that sell ad space. Since TTD is the industry leader, it has the most data, making it extremely attractive to companies looking to gain valuable insights into their consumers. 

Introducing Solimar

The Trade Desk also unveiled an upgraded platform last year, called Solimar.

The Trade Desk’s CEO said Solimar has boosted engagement rates so much that the average channel usage for ad campaigns on the new platform increased by about 50% over its conventional platform. The company stated that Solimar is also more effective when it comes to the collection and analysis of data for advertisers.

In a nutshell, Solimar helps advertisers to make better data-driven decisions, including:

1. Measurement
2. Goal setting
3. Campaign optimization

In the earnings call, The Trade Desk CEO said the majority of ad impressions on the TTD platform are now purchased via Solimar. With this success, the company expects to get rid of its legacy platform by the end of the year.

Solimar helps to optimize all steps of the marketing funnel, from predictive clearing to audience targeting and even price discovery. This optimization helps every ad campaign become more effective, meaning every ad dollar works as hard as it can. As a result, the flywheel spins faster, which activates more and more advertising dollars. 

TTD Financials

Since its founding in 2009, The Trade Desk has experienced explosive growth, including a 95% customer retention rate for 27 consecutive quarters. 

In February 2022, TTD gained 22.7%, smashing analysts’ expectations. In the 4th quarter of 2021, The Trade Desk crossed the $1 billion revenue threshold and ended the year with $1.2 billion in annual revenue — a 43% increase YOY.

In the fourth quarter of 2021, The Trade Desk posted more than $396 million worth of revenue — a 24% boost YOY. 

Also, in 2021, TTD ran $6.2 billion in ad spend through its platform.

On the Q4 earnings call, CEO and Founder Jeff Green said, “It was just ten years ago, May 2011, when we received our first $0.01 of spend, to think last year, we passed $6 billion in spend, is both astonishing and inspiring. I say that because I truly believe that we are just getting started.” 

The Trade Desk plans to capitalize on its growth momentum through the development of new products to keep pushing digital advertising forward, which is extremely valuable to advertisers because digital advertising allows brands to monitor ad engagement rather than merely throwing up a billboard or a newspaper ad with no real insights into engagement.

TTD is even prepared for the cookie-less future with the launch of its Unified ID 2.0 that allows companies to target their ads at specific consumer segments or consumers while still maintaining user privacy. Unified ID 2.0 does not use cookies to track consumers and is on trend with Apple and Google parent company Alphabet, who have also abandoned cookie advertising.

What’s more, Unified ID 2.0 is producing more robust results than advertising techniques that use cookies. The company saw a 1,000% return on ad spend with one of its customers while also reaching 40% more consumers.

Despite TTD shares being valued at 31 times sales, the company’s dominance in the market and potential for growth are too much to ignore. The company has the potential to continue growing steadily over the next ten-plus years. 

It’s safe to say The Trade Desk has become an industry leader. But, we also think it’s only started to scratch the surface, making TTD stock a screaming buy right now. 

A discounted cash flow forecast analysis shows upside potential of around 30% from current levels to almost $100.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.