The Trade Desk Stock Split: Buy or Sell?

The Trade Desk stock split on June 17 resulted in a 10:1 for split, meaning every shareholder prior to that date ended up with 10x more shares post-split. The market cap of TTD remained unchanged due to the split but the price per share dropped 90% to account for the increased shares outstanding. For investors, the question now is whether to buy or sell TTD on the news?

Get To Know The Trade Desk: Programmatic Ads

Cloud computing has progressively gained ubiquity in corporate computing since 2006, simplifying procedures, lowering costs, and improving productivity. Programmatic advertising, a breakthrough medium in the ad industry, represents a hidden treasure inside this technology.

Programmatic Advertising 101

Let’s begin with how marketing usually works to better understand programmatic advertising and break it down to digestible bits:

1. Marketers who wish to reach a large audience used to be limited to only a few options: television, newspapers, and magazines. They would work under contract, displaying ads, reaching the majority of audiences without any strategic or integrated approach.
2. Today, media channels have split, spreading over various platforms.
3. Because of the fragmentation of media, a marketer must be selective about advertising placement. This is where The Trade Desk (TTD: NASDAQ) solves a tricky problem of insights for advertisers.

The Trade Desk’s Open Platform: How It Works

The Trade Desk’s open platform and exchange allows advertisers to target their audiences, based on several criteria, resulting in a higher return on investment (ROI). Therefore, the advertiser can buy and sell ads by bidding on specific opportunities.

The technology featured by The Trade Desk allows ad users to control when, where, and how many times an ad appears across media channels.

In more basic terms, The Trade Desk oversees a self-service cloud-based site that permits buyers to manage and optimize digital ad campaigns with the use of ad formats and channels that include video, display, audio, and social media. This can be done on mobile devices, computers, and linked TV. The company uses an omnichannel approach, a buzz word that translates to connecting media and promotional channels.

The company serves ad agencies and other service providers who represent sponsored ads. It was established in 2009 and is based in Ventura, California.

As time progresses, the shift in advertising, using a programmatic ad model, will allow users to view ads on various media. The Trade Desk has positioned itself to capitalize on this trend.

What Is the Reason for the Stock Split?

When a stock like The Trade Desk has reached price levels that make it almost unaffordable for the average investor to buy a single share, it is not unusual for the company to split its shares to drive the price down. Doing so prevents the devaluation of the share price for current holders. Therefore, splitting a stock is often a positive sign; it tells you that management believes it has enough catalysts in place to increase the share price or the post-split price higher.

For The Trade Desk, this was a logical move. As the digital world turns toward programmatic ads, The Trade Desk has shown its revenues have increased by over 30% in the past 12 of 13 quarters. The stock also shows that its EBITDA margins have remained consistent and financially healthy.

However, with that being said, The Trade Desk has also experienced concerns about the phasing out of third-party cookies on browsers. The company depends on cookies to monitor customers and to run its ad campaigns.

Nevertheless, management anticipated this business risk and has come up with a solution called Unified ID 2.0. The open source software identifies visitors and is open and free to use.

Unified ID 2.0 fundamentally represents the next level of cookies. It works like cookies, allowing for consumer tracking, albeit anonymously. It also protects consumer identifies. The future-driven software offers a better solution to cookies. As cookies continue to be phased out, analysts believe the stock will rebound, displaying all-time highs.

When Will TTD Stock Split?

The TTD stock split became legally enforced on June 9, 2021, the date of record. However, the stock trading price did not reflect the TTD split until after June 16, 2021, or the date of distribution.

Therefore, if you traded TTD stock between June 9 and June 16, 2021, the stock will trade as it did before the announcement of the stock price. Trading reflected the split beginning June 17, 2021.

The trading price, on that date, is about one-tenth the previous day’s closing price.

Should You Buy TTD Shares Post Split?

Based on The Trade Desk’s financials and current stock split, including its incorporation of Unified ID 2.0, now could well be the time to buy the stock if you have not already purchased TTD shares.

Often a stocks return to pre-split highs when fundamentals are solid as they are with TTD. Look no further than Tesla shares to see its 5:1 split sparked a furious rally soon afterwards that resulted in shares popping back up to their old former split price highs.

Of course this doesn’t always happen but it’s a general rule of thumb that a stock split is a vote of confidence by management in the future of the company and its ability to climb higher in price again.

When To Buy TTD Shares?

TTD stock’s shares have shown a phenomenal increase historically, before the recent split. However, some investors have reasoned that the stock rose too much and too fast.

Although the company has a strong history of reporting earnings, a miss on the top line sales or bottom line profit figures or forecasts could catalyze a share price drop which would likely prove to be an opportune moment to snap up shares long-term.

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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.