The Trade Desk Stock Forecast

It’s often said that advertising is the world’s “second oldest profession,” helping make the case for customers to buy products and services. According to media research firm PQ Media, the global advertising industry has now grown to a market value of $1.2 trillion.

The Internet, in particular, is becoming increasingly crucial to advertising strategies. In 2021, it’s predicted that Internet advertising will account for 52 percent of global advertising expenditure, bypassing the halfway mark for the first time.

So, it’s no surprise that advertising companies such as The Trade Desk [NASDAQ: TTD] have performed exceptionally well lately. Shares of the The Trade Desk have been soaring in 2019, more than doubling since the start of the year. But will the stock be able to keep up this rally, or are there troubled times ahead?

What Does the Trade Desk Do?

The Trade Desk [NASDAQ: TTD] is an advertising technology company that operates a self-service tool for buyers to create advertisements across multiple channels: display ads, native ads, social ads, video ads, and more.

Essentially, The Trade Desk’s demand-side platform enables users to manage their data-driven digital advertising campaigns, providing valuable, accurate insights into the audience that each campaign will reach.

The company is also experimenting with new ways of delivering targeted digital ads. For example, The Trade Desk’s Connected TV (CTV) service gives advertisers more control over the audiences who view their TV commercials.

An estimated 182 million people in the U.S. own a connected TV, making this an extremely lucrative opportunity. The platform also allows brands to target audiences based on the music they listen to on apps like Pandora, Spotify, and SoundCloud.

The Trade Desk [NASDAQ: TTD] is headquartered in Ventura, California and employs 1,300 people across 21 locations worldwide.

Jeff Green is the current CEO of the company, which he also helped co-found with CTO Dave Pickles in 2009. Competitors of The Trade Desk include MediaMath, DataXu, Amobee, Google’s DoubleClick Bid Manager, and Amazon’s Demand-Side Platform (DSP).

Is The Trade Desk a Buy?

Let’s start with the good news: shares of The Trade Desk have been on a tear lately.

What’s more, this isn’t just a recent development – the stock is trading at 10 times its initial price during its IPO in September 2016. This success story has much to do with the company’s astoundingly rapid growth: 55 percent in 2018 and 41 percent in Q1 2019, with $160 million in quarterly revenue.

In July 2019, The Trade Desk announced that it was joining forces with Amazon in a deal that allows the company to sell ad inventory on the Amazon Fire TV device.

This will allow The Trade Desk to reach even more audiences with its CTV service, which is why CEO Green called the deal a “game changer” for the company. It’s no surprise that TTD shares rose by 9 percent following the announcement.

There are several indications that The Trade Desk is poised to continue these strong results into the foreseeable future.

First, the company managed to attract a number of large buy-side clients early on, allowing it to position itself well in the digital advertising ecosystem. The Trade Desk used these partnerships as leverage to attract ad sellers and more data that it could use to improve its platform, creating a self-reinforcing loop.

Second, The Trade Desk [NASDAQ: TTD] clearly prioritizes the satisfaction of both its clients and its employees. In 2018, Fortune magazine ranked the company second on its list of the top 100 medium workplaces. In addition, The Trade Desk’s customer retention rates have been over 95 percent for more than 20 quarters in a row.

What are the Risks of Buying The Trade Desk?

Shares of The Trade Desk have been a seriously impressive success story, especially thus far in 2019; however, that doesn’t mean that the stock is entirely without risk.

The company faces some stiff competition from major tech firms like Google, Amazon, and Adobe. Still, The Trade Desk sets itself apart from many of its rivals with its value proposition: helping advertising agencies purchase ad inventory.

The risk of a larger economic recession is the second concern that many would-be investors in The Trade Desk might have.

Currently, TTD is a growth stock, which means that it outperforms during good times but has a tendency to underperform during an economic slowdown.

What’s more, a recession would likely affect the advertising industry harder than most, since advertisers tend to cut their budgets when consumers have less discretionary income.

The Trade Desk Stock Forecast: Summary

As it stands now, it’s hard to find much fault in TTD stock. The company’s recent Q2 2019 earnings report only continued to reinforce investors’ positive outlook.

Revenue increased by 42 percent year over year, from $112 million in Q2 2018 to $160 million in Q2 2019. As a result, The Trade Desk [NASDAQ: TTD] shifted its 2019 revenue projection up from $645 million to $653 million.

Despite the risks of a recession in the short to medium term, TTD has tremendous long tail growth opportunities for investors who are willing to sit put.

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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.