The Nasdaq Composite entered a bear market in Q1. One investor treating the pullback as a buying opportunity is billionaire Israel Englander of Millennium Management. He added to his shares of The Trade Desk, an industry leader gaining momentum in the programmatic advertising space.
Although analysts have been cutting price targets for growth stocks, including shares of The Trade Desk, this company continues to report outstanding revenues and cash flow, so is now the time to buy in?
Massive Market Opportunity
The Trade Desk (TTD) is a media buying platform specializing in digital advertising. The company offers a marketplace that allows its customer to purchase ads for social media, display advertising, and advanced TV campaigns.
As global advertising approaches a $1 trillion total addressable market, The Trade Desk is in an excellent position as the leading platform for agencies and brands striving for greater data-driven marketing.
The Trade Desk has strengthened its presence each year, leading to global industry recognition. In 2021, the company announced its expansion of partnerships, including collaborations with Walmart, Samsung Ads, Xiaomi, and NBCUniversal. For the second year, Gartner also named The Trade Desk a Leader in the Gartner Magic Quadrant for Ad Tech, alongside tech giants Google and Amazon.
The company stands out for its independence. Since it does not own media properties, the company benefits from a less-biased business model. For example, Amazon encourages ad buyers toward its inventory and Fire TV, whereas The Trade Desk has no such conflicts of interest. That advantage has helped drive immense growth.
A Closer Look at the Numbers
Shares of TTD are down over 47% year to date, despite the company’s impressive growth. Since 2013, The Trade Desk has been profitable, reporting revenue of $315 million for the first quarter of 2022, representing an increase of 43% year over year.
Fiscal year 2021 financial highlights include:
- Generated nearly $6.2 billion of total spend on the platform, beating the company’s goals for the year.
- $1.19+ billion in revenue, compared to $836 million in 2020 (an increase of 43%).
- Customer retention remained over 95% for the year, as it has for the past eight consecutive years.
- Net operating cash flow was $420.58 million in 2021, compared to $70.54 million in 2019.
Is Now the Time to Buy Shares of TTD?
While Buffett famously said, “Be fearful when others are greedy and be greedy when others are fearful” not all stocks that plummet are a bargain. However, downturns are an excellent time to buy high-quality businesses, and The Trade Desk is one of them.
Currently, The Trade Desk only controls around 1% of the annual global advertising spend. Investors can expect healthy returns over the next years based on the company’s past growth and future plans.
The shift toward digital ad spend is here, with data showing global digital advertising spend will increase from $407 billion in 2022 to $753 billion in 2026, representing growth of 85%.
The Trade Desk is perched in prime position to capitalize on the trend. And if analysts are right, the company has upside of over 40% to $70.80 ahead of it. Given the tailwinds and the upside, the risks might just be worth the rewards.