Technology Stocks

Trade Desk Inc (NASDAQ:TTD) Gets Ready to Rock or Be Rocked

Trade Desk Inc (NASDAQ:TTD) is set to put out its Q3 numbers after the close today, and management will host a call at 5 PM ET. Traders will likely be very interested in this report given how powerful the results and reaction have been over the past several for this emerging leader in the independent programmatic advertising platform space.

TTD has beaten estimates and raised guidance three quarters in a row, but the last two were more significant blow-outs. In Q2, TTD said four significant industry events were positive catalysts for TTD near and long term: Google sharply limiting how their DoubleClick ID can be used, consolidation among media companies, GDPR as a tailwind in the EU, and the launch of The Next Wave, the biggest product refresh in the company’s history including AI, a media planning tool, and a new user interface.

Trade Desk Inc (NASDAQ:TTD) is a cloud-based advertising-buying platform.

Ad buyers can value each impression like traders value stocks, using first and third party data to decide which impression to buy and how much to pay. Its platform enables advertising clients to purchase and manage digital advertising campaigns across various formats, including connected TV (CTV), mobile, video, audio, display, social and native, on a multitude of devices, including smart TVs, computers, and mobile devices.

There was very little action in the stock for at least a year until Q1 2018 results hit the tape and the world took notice of the stock (that was May 10). It has been off to the races ever since, powered by, a steady stream of new brands and agencies joining the company’s platform. Looking ahead, the company has expressed interest in Connected TV.

As the company frames itself, it provides a self-service omnichannel software platform that enables clients to purchase and manage data-driven digital advertising campaigns in the United States and internationally. The company’s platform allows clients to manage integrated advertising campaigns in various advertising channels and formats, including connected TV, mobile, video, audio, display, social, and native on various devices, such as smart TVs, computers, and mobile phones and tablets. It serves advertising agencies and other service providers for advertisers.


Getting Down to Brass Tacks

Chief Executive Jeff Green recently said his company has never been better positioned as an alternative to the Facebook and Google duopoly. The use of 3rd party data on The Trade Desk exploded in March after Facebook said it will phase out 3P data in the wake of the Cambridge Analytica scandal.

Key competitive advantages are the company’s objective independence and omni-channel capabilities. Ad spend growth by channel: Mobile +89%, Audio +191%, Mobile video +156%, Mobile in-app +104%. The connected TV segment is a huge opportunity in its early stages of growth. Connected TV ad spend doubled sequentially in Q2 after growing 21x year-over-year off a low base in the first quarter.

The Street is looking for Q3 adj. EPS of $0.50 vs. $0.35 last year with EBITDA +41% to $34.5 mln and revenue up 48% to $117.5 mln. The company guided for EBITDA of $33 mln on revenue of $116 mln. S&P Capital Consensus calls for FY18 EBITDA up 50% to $143 mln with revenue up 49% to $461 mln and Q4 EBITDA up 32% to $52 million with revenue up 41% to $145 mln. The Trade Desk guided for FY18 adjusted EBITDA of $140 mln on revenue of at least $456 million.

The Trade Desk is focused on top-line growth in land-grab mode, going after market share in the burgeoning programmatic ad industry. The company said it would outperform the 21% CAGR expected from the programmatic market through 2020. Long-term goals include a 15-20% take rate, a 35% operating margin and a 40% EBITDA margin.

The Trade Desk has a $5.2 billion market cap and trades at ~11x sales or 8.5x FY19 sales estimates ~55x EPS or 44x FY19 EPS estimates while boasting SaaS industry leading margins. About 6% of the ~34M share float is sold short, down from 14% last quarter and 27% before the Q1 print. The options market is pricing in a whopping ~18% move in the stock tomorrow.

In other words, momentum continues to be extremely favorable. The only question here is really about whether or not the market’s whisper expectations have lifted the bar too high.

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