1 Incredible stock growth down 64% on Hand Over Fist purchase

The bear market that started earlier this year has been particularly tough for tech stocks. The Nasdaq composite is down 35% from its high, compared to a 22% drop for the S&P 500. The decline was stimulated by the almost 40-year high inflation, the rise in interest rates and the consequent economic uncertainty.

It is important to remember, particularly in the midst of the worst economic downturn since 2008, that a bear market affects good and bad stocks alike. This creates incredible deals in the process, particularly for investors who can tell when a stock is falling price it has nothing to do with the strength of the underlying business.

A company that has consistently operated from a position of strength is The Commercial Desk (TTD 2.65%)which earned a staggering 2,100% since its initial public offering (IPO) in 2016. Although many investors have never heard of the programmatic advertising pioneer, it would be hard to find an advertising executive who is not deeply familiar with The Trade Desk and the its cutting-edge adtech platform.

Image source: Getty Images.

An adtech primer

Programmatic advertising is the process that uses sophisticated algorithms and high-speed computers to put the right ads in front of the right customer at the right time. The Trade Desk platform handles the grunt work, facilitating bidding in real time, which helps its clients get the best return on investment.

Additionally, the company has strong relationships with the world’s largest advertising agencies and a broad coalition of industry heavyweights who have adopted Unified ID (UID) 2.0, its privacy-compliant identifier that is the apparent inheritor of cookies. ad tracking, which are clearing the way for oblivion.

Finally, The Trade Desk recently launched OpenPath. This gives advertisers direct access to premium digital advertising inventory, eliminating the need for a middleman and helping publishers maximize revenue from their ad impressions.

Three factors that drive strong and continuous growth

During the conference call to discuss the findings, founder and CEO Jeff Green said the company has gained more market share “than at any point in our history,” citing three factors driving this impressive land grabbing.

First, Green noted that in light of macroeconomic challenges, programmatic advertising offers marketers the best value for money, providing “one of the most effective ways to drive relevance and differentiation.” Furthermore, they see increasing value in the open Internet, as opposed to the included “walled gardens” Alphabetis Google and Meta platforms‘ Facebook.

Second, Green cites the “transformative role” of connected TV (CTV) in showing its worth. He said CTV is “The Trade Desk’s fastest growing channel and has quickly become our biggest”. Ad spend for CTV grew in most of the company’s international markets faster than in the United States. Green noted that “the pace is picking up in all corners of the world,” fueled by “working partnerships with virtually all premium CTV providers around the world.” It doesn’t hurt. Netflix And Disney+ will soon offer ad-supported tiers of their popular streaming services, further expanding the CTV advertising market.

Finally, the UID is reaching “critical mass,” according to Green. The ability to precisely target advertising, without the resulting invasion of privacy, is driving a centuries-old change in the space and The Trade Desk is the primary beneficiary. In fact, Green predicts that by early next year “more than half of the data inventory flowing through our platform” will be a direct result of UID 2.0.

The proof is in the pudding

Even in the midst of the recession, The Trade Desk continued to reap impressive results. For the third quarter, revenue of $ 395 million increased 31% year-over-year, while adjusted earnings per share (EPS) of $ 0.26 increased 44%. This was in stark contrast to the results of Alphabet, which increased revenues by just 6% over the same period, and Meta, whose revenues fell 4%, marking the second consecutive quarter of year-over-year decline.

The Trade Desk results also exceeded Wall Street expectations, as analyst consensus estimates predicted revenue of $ 386.2 million and EPS of $ 0.23. The company is clearing both bars with ease.

It also maintained 95% customer loyalty, a streak it has maintained for over eight years.

A word about evaluation

The Trade Desk has all the credentials for an advertising powerhouse, but the actions aren’t for everyone. It currently trades at 14 times sales, when a reasonable price / sales ratio is between 1 and 2. However, given this unique combination of strong growth factors, accelerating headwinds, and consistent performance, The Trade Desk has proven to be worthy of a premium evaluation. These factors also make it one that equity investors should buy gradually.

Randi Zuckerberg, former director of market development and Facebook spokesperson and sister of Meta Platforms CEO Mark Zuckerberg, is a board member of The Motley Fool. Suzanne Frey, executive of Alphabet, is a member of the board of directors of The Motley Fool. Danny Vena has positions in Alphabet (A shares), Meta Platforms, Inc., Netflix, The Trade Desk and Walt Disney. The Motley Fool holds positions and recommends Alphabet (A shares), Alphabet (C shares), Meta Platforms, Inc., Netflix, The Trade Desk and Walt Disney. The Motley Fool recommends the following options: January 2024 long calls $ 145 on Walt Disney and January 2024 short calls $ 155 on Walt Disney. The Motley Fool has a disclosure policy.

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