Can the Opportunity to Invest in The Trade Desk's Shares Still Exist?
In the thrilling rollercoaster that is 2023's stock market, The Trade Desk (TTD) has emerged as a standout performer. With a staggering 75% year-to-date increase, this digital advertising specialist has left the S&P 500 in the dust, trumpeting a fivefold victory. This meteoric rise comes after a dismal 2022, marked by a 51% plunge.
The tech sector's revival is undoubtedly a significant catalyst, but The Trade Desk's resilience stretches beyond these favorable market conditions. Despite the sternest economic challenges since the 2008 crisis, the company managed to chalk up year-over-year growth when even its competitors faltered. This tenacity and adaptability suggest a solid foundation for riding the market rebound higher.
However, the question looms: should you hop aboard the TTD bandwagon now or wait for a better time to board? A pause for reflection is warranted.
Why was TTD struggling?
TTD's unwavering performance amidst a struggling economy can be attributed mainly to its cutting-edge technology. Its targeted audience optimization and exceptional cost-effectiveness have won the confidence of marketers who value transparent pricing and proven results.
The temperamental nature of advertising in economic downturns — a line item that can be easily scaled back or ramped up without disrupting operations — was palpable in 2022. While TTD's revenue still posted a respectable 32% growth, it paled in comparison to the 43% growth achieved in the previous year.
For context, rival 'ad tech' giant Alphabet witnessed a mere 7% rise in Google Ad revenue, while Meta Platforms faced an ad sales reduction by 1%. Despite these challenging circumstances, TTD managed to swipe market share away from its larger competitors.
The first quarter results for 2023, which outperformed expectations, and the robust revenue forecast of 43% for the second quarter signal potentially brighter days ahead.
What could propel TTD further?
Beyond the general revival of the advertising market, TTD boasts several additional growth drivers.
Digital advertising continues to capture a rapidly growing share of the advertising pie, accounting for $0.58 of every ad dollar spent in 2023. Programmatic advertising, with its intelligent algorithms and high-speed computers, is the fastest-growing segment and forms the backbone of TTD's operations. The company's technological prowess, recently amplified by innovative upgrades, maintains its leading position.
In early June, TTD launched Kokai, its revolutionary AI-driven media buying platform. This groundbreaking tool applies cutting-edge algorithms at every step of the ad buying process, offering marketers incredibly targeted, cost-effective ad impressions.
Additionally, TTD's latest tools to measure performance across essential marketing channels ensure marketers receive quantifiable outcomes, bolstering its competitive advantage.
Should you invest in TTD now?
Candidly, TTD's share price is hardly a steal at its current valuation. The stock is currently trading at a lofty 64 times forward earnings and 16 times forward sales, which could be an off-putting prospect for value investors.
However, TTD's consistent historical growth performance, even in the face of tough market conditions, warrants reevaluation. Moreover, the company anticipates healthy double-digit revenue and EPS growth through 2024. Given TTD's track record, these targets may even prove conservative.
Whether TTD's recovery gains momentum earlier than anticipated is a debate worth having. But the evidence suggests that this momentum will build as the economy rebounds, offering a compelling reason to consider investing in the company.
After analyzing TTD's impressive performance and potential growth drivers, some investors might be interested in exploring the world of finance and investing in The Trade Desk's stocks. Despite its high valuation, TTD's consistent growth and promising future prospects could make it an attractive investment option for those seeking to diversify their money portfolios. As always, thorough research and careful consideration are essential before making any investment decisions.
