Trade Desk Inc (NASDAQ:TTD) shares were hammered after hours yesterday. But it’s a bit difficult to understand why. The quarter was another nice beat and raise, and the company looks well-positioned to keep that streak alive three months hence.
In basic terms, Q3 sales ramped by 50% y/y to about $119 million, which was about a percent above estimates and two percent above guidance. That was a second-derivative fall off from beat rates in July, but still impressive given how sharply expectations have ballooned.
Trade Desk Inc (NASDAQ:TTD) also pushed its Q4 estimates up to inch above sales growth seen 12 months ago (43% forecast growth for Q4 2018 versus 42% actual for Q4 2017). If you know anything about these guys, that means they are probably expecting 50%. Analysts have started to catch up, which is likely why the initial price indication on shares in after-hours trade tanked the stock down to test the $100/share level (which held firm).
For the year as a whole, sales are expected to grow at least 51% with EBITDA up 52%.
Some of the most interesting insights on the company come from its co-founder and CEO, Jeff Green. He seems more bullish than ever, and we would suggest that his handling of the narrative is one of the stock’s big investment drivers. He has a tremendous grasp of how to communicate the company’s edge in a space that has a lot of upside ahead.
Segment growth for Q3 breaks down as follows: Mobile (in-app, video, and web) grew 65% to a record 46% mix; Connected TV grew over 10X; Audio grew 192%; Mobile video grew 98%; Mobile in-app grew 90%; Data grew 70%; cross-device spend grew 200%.
In addition, most international markets are growing by triple digits for TTD, which is the low-hanging fruit, along with the connected TV space.
Finally, we are seeing a real effort to strengthen Asian markets with a new partnership with Tencent (to add to existing partnerships with BIDU and BABA). At 7.5x 2019 sales, it’s not hard to see more upside following this strong bid in play today.
The Sell Side Notes this Morning on TTD
Pivotal Research notes TTD reported a good 3Q18, altering guidance slightly, but within a range that is thematically consistent with their view on the company and its business. Their favorable perspective on the company and its operations continues to be overwhelmed by an unrealistic valuation. Although The Trade Desk is off to an early lead in its presence buying programmatic inventory on Connected TVs, the space will feature a different set of competitors who are as well or in some places better established. In addition, at scale (to the extent there ever is any) take rates will be very low. If there is an opportunity, it may come if The Trade Desk can take meaningful share from Google’s DSP, which despite well-known product limitations, probably has more than half of the total market for DSP activity. Instead, they think that most of The Trade Desk’s growth has come from share gains from other pure-plays and increasing spending on programmatic media from existing clients; Sell $55 tgt
Oppenheimer: Bullish mgmt commentary on 2019, combined with TTD’s unique SaaS company profile (a rule of 80 business), makes this leading digital-media buying platform supplier a compelling fundamental story into 2019; $130 tgt
RBC defended the stock; $170 tgt
Wells Fargo: Strong 3Q, Relatively modest beat/raise; take rate likely helped; $110 tgt.