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Should You Buy, Sell or Hold The Trade Desk Stock Before Q3 Earnings?

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The Trade Desk (TTD - Free Report) is set to release its third-quarter 2024 results on Nov. 7.

TTD estimates third-quarter 2024 revenues to be at least $618 million, suggesting growth of 25% on a year-over-year basis.

The Zacks Consensus Estimate for third-quarter 2024 revenues is pegged at $619.89 million, indicating year-over-year growth of 25.67%.

The consensus mark for earnings is pegged at 40 cents per share, unchanged over the past 60 days, suggesting 21.21% year-over-year growth.

TTD’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters while missing the same in the remaining quarter, with an earnings surprise of 8.91%, on average.

The Trade Desk Price and EPS Surprise

 

The Trade Desk Price and EPS Surprise

The Trade Desk price-eps-surprise | The Trade Desk Quote

 

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Key Factors to Note for TTD’s Earnings

TTD is benefiting from an expanding clientele. Over the past 12 months, its platform has been used by the largest 200 advertisers in the world to run their advertising campaigns.

Customer retention remained above 95% in second-quarter 2024. The trend is expected to have continued in the third quarter.

In the second quarter of 2024, TTD reported revenues of $585 million, up 26% year over year, driven by the strong adoption of its CTV, retail media, Kokai and UID2 solutions.

The Trade Desk is expected to have benefited from strong spending in the CTV and retail media domains in the to-be-reported quarter. CTV is its fastest-growing channel, as it reaches more than 90 million households and above 120 million CTV devices.

Exiting second-quarter 2024, TTD strengthened its partner network with key new collaborations, positioning it for sustained momentum into the third quarter.

Netflix (NFLX - Free Report) selected TTD as one of its primary programmatic partners, enhancing its advertiser reach. Fox (FOXA - Free Report) expanded its partnership with The Trade Desk by integrating UID2 and OpenPath across FOX brands, and the AdRise platform. CBC’s Olympics inventory became available programmatically via TTD.

E.W. Scripps became the first CTV publisher to adopt TTD’s OpenPass, for streamlining its programmatic ad buying process.

TTD Trading at a Premium

TTD shares have appreciated 64.4%, outperforming the Zacks Computer & Technology sector’s return of 23.5% and the Zacks Internet Services industry’s 19.2% rally.

Year-to-Date Performance Chart

 

Zacks Investment Research
Image Source: Zacks Investment Research

 

However, the Value Score of F suggests a stretched valuation for The Trade Desk at the moment, which makes it a risky bet for risk-averse investors.

The TTD stock is trading at a premium with a forward 12-month Price/Sales of 20.12X compared with the industry’s 5.9X.

Price/Sales Ratio (F12M)

 

Zacks Investment Research
Image Source: Zacks Investment Research

 

Strong CTV Demand to Aid TTD’s Top-Line Growth

TTD benefits from the growing demand for digital and programmatic advertisement. The total advertising addressable market is trending toward $1 trillion, which presents a significant growth opportunity for The Trade Desk. Expanding international business also bodes well for TTD’s prospects.

Strong momentum across TTD’s two initiatives, namely UID2 and OpenPass, which focus on identity and authentication in the post-cookie era, benefits from increased demand for its advertising services.

A strong partner base, which includes the likes of Disney (DIS - Free Report) , Comcast’s NBCU, Walmart, Amazon, Roku, Fox, VerticalScope Holdings, foodpanda and LG Electronics, has been a key catalyst.

Integrations with Disney’s real-time ad exchange, which includes Hulu and Disney+ through TTD’s OpenPath technology, have been a game changer. 

FOXA-TTD’s integration includes The Trade Desk’s UID2 identity solution and its OpenPath initiative across Fox's AdRise ad platform.

The Trade Desk’s strong liquidity position is noteworthy. As of June 30, 2024, it had cash, cash equivalents and short-term investments of $1.5 billion.

The free cash flow was $57 million in the second quarter.

The strong liquidity position helps TTD sustain its share buyback program. As of June 30, 2024, the company had $575 million available and authorized for repurchases.

Conclusion

The Trade Desk’s strong portfolio and expanding partner base are positive. 

However, stretched valuation is concerning for investors. 

The Trade Desk currently has a Zacks Rank #3 (Hold), suggesting that it may be wise to wait for a more favorable entry point in the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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