Down 30% from Record Highs, Is TTD Stock a Buy?

Author: Finscreener

Estimated read time: 4 minutes

Publication date: 10th Jan 2022 11:11 GMT+1

Several technology stocks have been hit hard in the last few months as investors were worried about rising inflation rates, the threat of higher interest rates, steep valuations, and a new wave of infections due to the Omicron variant. The Trade Desk (NASDAQ: TTD) is a high-flying tech stock that has surged 2,500% since its IPO in 2016. But its also down 31% from all-time highs allowing you to buy the dip.

Let’s see why TTD stock is a solid long-term bet at current prices. 


An overview of The Trade Desk

Valued at a market cap of $37 billion, The Trade Desk operates a cloud-based platform allowing marketers to create, manage and optimize data-driven digital ad campaigns in various ad formats devices, and channels. Additionally, it also provides you with data and value-added services and platform features.

Traditionally companies have acquired advertising space manually after negotiating with publishers making it a time-consuming, costly, and inefficient process. Marketers had limited flexibility to target content and it was impossible to optimize ad campaigns too.

TTD has gained traction in the programmatic ad space allowing participants to bid on advertising inventory. It has successfully focused on the buy-side of the digital ad segment working with advertisers instead of publishers. So, now marketers can accelerate their decision-making process and support their future plans based on data by paying for ad impressions that can reach the target audience.


Why TTD stock is a buy

In 2020, the TTD platform saw over $4.2 billion in ad spending on its platform allowing it to generate $836 million in sales. The Trade Desk enjoys a high customer retention rate that stands at 95% for the seventh year in a row, which should result in incremental revenue over time.

In the last 12-months, TTD sales rose by 53% year over year to $1.1 billion on the back of rising revenue from the connected TV space. Its free cash flow more than doubled to $317 million as well.

TTD is well poised to benefit from multiple secular tailwinds that include a rapidly expanding addressable market. For example, programmatic ad spending is forecast to rise by 20% to $155 billion in 2021, providing The Trade Desk with enough room to increase sales in the upcoming quarters.

The cord-cutting phenomenon should act as another key driver for TTD which will drive digital ad spending significantly higher by the end of the current decade. The Trade Desk is also bullish on CTV to drive top-line higher in addition to the growing adoption of social media, mobile, and video advertising.

A report from eMarketer estimates CTV ad spending in the U.S. to touch $30 billion by 2024, up from $14.44 billion in 2021. It suggests CTV will account for 7.4% of total media spending in 2024, up from 4.7% in 2021.

At the end of Q2, TTD services have reached over 120 million CTV devices in the U.S., in addition to 87 million households.


What next for TTD stock?

The Trade Desk continues to expand its suite of products and solutions. It recently launched the Solimar platform where ad buyers can create campaigns on the basis of first-party data. TTD also partnered with Walmart (NYSE: WMT) to develop a new demand-side platform. The partnership will allow The Trade Desk to gain access to first-part data of the retail giant.

Analysts expect the company to report sales of $1.19 billion in sales in 2021 and revenue is forecast to increase by 30% to $1.55 billion in 2020. This will allow The Trade Desk to expand adjusted net income from $0.69 per share in 2020 to $0.91 per share in 2022.

We can see that TTD stock is valued at a forward price to sales multiple of 24x and a price to earnings multiple of over 80x which is steep. However, Wall Street expects TTD stock to gain around 30% in the next 12-months.

Disclaimer: The writer is an experienced financial consultant who writes for The observations he makes are his own and are not intended as investment or trading advice.