TTD Stock Reaches New Heights
On August 20, 2024, shares of The Trade Desk Inc. (NASDAQ:TTD) hit a 52-week high of $103.35, closing at $102.14. This represents a 41.9% increase year-to-date, significantly outperforming the Zacks Internet Services industry’s 17% gain and the Zacks Computer & Technology sector’s 22.5% return.
Key Drivers Behind the Growth
The Trade Desk’s impressive performance is driven by its expanding client base and successful initiatives such as UID2 and OpenPass, which enhance identity and authentication in advertising. Notable adoptions include:
- Roku Inc. (NASDAQ:ROKU) integrating UID2 for precise targeting and secure data collaboration.
- Pandora Media, a subsidiary of Sirius XM Holdings Inc. (NASDAQ:SIRI), becoming the first audio publisher to adopt UID2.
- LG Electronics’ integration of UID2 to utilize first-party data across its extensive audience network.
Partnerships with major companies like Netflix Inc. (NASDAQ:NFLX), Disney Inc. (NYSE:DIS), Walmart Inc. (NYSE:WMT), and others have significantly contributed to TTD’s success. Additionally, Fox Corporation (NASDAQ:FOXA) has expanded its partnership with TTD, incorporating UID2 and OpenPass across its brands and platforms.
Valuation Concerns
Despite the strong performance, The Trade Desk’s current valuation raises concerns. TTD stock’s Value Score of F indicates that it may be overvalued. TTD’s forward 12-month Price/Sales ratio stands at 18.07X, compared to the Zacks IT Services industry’s 5.98X.
Technical indicators, however, are bullish as TTD trades above its 50-day moving average, reflecting strong upward momentum.
Growth Prospects
In Q2 2024, The Trade Desk reported revenues of $584.6 million, a 26% year-over-year increase, driven by robust adoption of its CTV and retail media solutions. The adjusted EBITDA margin expanded by 200 basis points to 41%.
The Trade Desk is poised to benefit from increasing investments in CTV and retail media. CTV remains its fastest-growing channel, reaching over 90 million households and 120 million devices. The global advertising addressable market, trending towards $1 trillion, presents significant growth opportunities for TTD.
Positive Estimate Revisions
For Q3 2024, The Trade Desk is expected to report revenues of at least $618 million, reflecting a 25% year-over-year increase. The Zacks Consensus Estimate for Q3 revenues is $619.4 million, with earnings projected at 40 cents per share. For the full year, the revenue estimate is $2.45 billion, indicating a 25.66% growth, with earnings expected to be $1.62 per share.
Strong Liquidity
As of June 30, 2024, The Trade Desk had $1.51 billion in cash, cash equivalents, and short-term investments, with no debt. Free cash flow was $57 million in Q1 2024.
Conclusion
The Trade Desk’s expanding partner base and strong portfolio are positive indicators for the stock’s future performance. Although current valuation concerns exist, TTD’s growth prospects are promising. TTD stock carries a Hold rating, suggesting that investors may want to wait for a more favorable entry point while existing shareholders might expect rewarding growth over the long term.
Featured Image: Unsplash
