The Trade Desk (NASDAQ:TTD) stock took off like a rocket ship in early November after the programmatic advertising leader reported huge revenue and profit beats in its third-quarter earnings report.

Specifically, The Trade Desk topped revenue estimates by an impressive 20%, while almost tripling consensus earnings estimates. TTD stock soared about 30% to all time highs in response.

Year-to-date, Trade Desk is now up 220%.

While valuation is a rising concern for this red-hot stock, the big reality here is that Trade Desk — as the most qualified and largest player in the booming data-driven advertising market — has more than enough growth potential over the next 5 to 10 years to grow into this stretched valuation.

The implication, of course, is that while TTD may not be worth chasing on this meteoric rally, it is certainly worth buying on the next dip. In TTD stock, you have a long-term winner that is one of the market’s best “buy and hold” growth stocks.

Strong TTD Earnings

I cannot emphasize this enough. The Trade Desk’s third-quarter earnings report was about as strong as it gets when it comes to earnings reports.

Not only did revenues and profits blow estimates out of the water (the guide also came in well ahead of expectations), but the underlying numbers and trends were all incredibly bullish in the quarter.

Revenues rose 32% year-over-year, paced by omni-channel growth across connected TV (up more than 100%), mobile video (up 70%) and audio (up 70%). Those are impressive marks, because it symbolizes that The Trade Desk’s revenue growth rate has returned to where it was before the pandemic emerged. Yet, the pandemic is still around, and ad spending is still depressed.

So, the fact that The Trade Desk is back to 30%-plus revenue growth in a down ad spending environment strongly implies that the company is leaning into its data-driven value prop to gain significant ad dollar market share. That’s exceptionally bullish long-term.

Meanwhile, gross margins expanded ~340 basis points to over 80% for the first time ever, and adjusted EBITDA margins rose 660 basis points, paced by 340 basis points of gross margin expansion and another 320 basis points of positive operating leverage. This tremendous margin expansion broadly means that The Trade Desk’s business model is highly scalable, so that as long as revenues keep powering higher at 20%-plus rates, margins should keep expanding, too, providing extra firepower for profit growth.

Perhaps most importantly, management expects all of these things to continue into the fourth quarter. Fourth quarter revenues are expected to rise 33%, while adjusted EBITDA margins are expected to expand by more than 100 basis points.

Big picture: it was a stellar report, which underscored that the company is firing on all cylinders even in a down market, and to that extent, the monster rally in TTD stock makes complete sense.

Data-Driven Advertising Is the Future

Zooming out, The Trade Desk’s monster third quarter earnings report broadly underscores that data-driven advertising is the future of advertising.

The story here is pretty simple.

For decades, humans made advertising decisions based on gut feelings and limited data. The process was inefficient, slow, error-prone and resulted in sub-optimal ad dollar allocation. But recent advancements in machine learning and AI have enabled a new era of data-driven advertising, wherein computers and algorithms are making advertising decisions based on robust, dynamic data. This process is far faster, far more cost-effective, far less error-prone and — most importantly — results in optimal ad dollar allocation wherein advertisers are consistently getting the most bang for their buck.

Over the past few years, we have seen this shift from legacy advertising to data-driven advertising play out.

But, the Covid-19 pandemic meaningfully accelerated this transition, because it forced advertisers to sharpen their budgets and cost-effectively optimize ad spending. In so doing, many of them rushed to adopt to data-driven advertising.

So begins the global takeover of data-driven advertising.

By the end of the decade, it is quite likely every brand and advertisers across the globe employs data-driven advertising for their digital marketing campaigns, from CTV advertising to mobile video advertising to audio advertising, and everything in between. The global digital ad market is marching towards $1 trillion in size. So, in effect, the shift towards data-driven advertising is a trillion-dollar disruption that is still in its early stages.

That’s incredibly bullish for TTD stock.

Huge Long-Term Potential

The Trade Desk has strongly emerged as the leader of the data-driven advertising revolution.

Long story short, the company functions on the demand-side of the ad model, so they provide tools which help advertisers leverage data and advanced algorithms to optimize their ad spend. The Trade Desk has turned into the best in the world at doing that, and as a result, has sported a 95%-plus customer retention rate over the past five years, while simultaneously growing revenue by more than 20% every year.

This strong growth dynamic will persist for many years to come.

At present, only about 1% of all digital ad dollars in the planet flow through The Trade Desk’s platform. That’s a tiny number. It has been growing substantially over the past few years. It will continue to grow substantially over the next several years, too, as more and more companies lean into data-driven advertising, setting the stage for this company to sustain 20%-plus revenue growth for the next five to ten years.

The company’s highly scalable business model ensures that, so long as 20%-plus revenue growth is the norm, profit margins will keep expanding, meaning profit growth at The Trade Desk will likely run in the 25% to 30% range for the foreseeable future.

Under those assumptions, I see the company easily clearing $40 in earnings per share by 2030. My bull case calls for $60. Based on a 35X exit multiple, that implies a long-term price target for TTD stock of anywhere between $1,400 and $2,100.

Thus, in the long run, TTD stock still has enormous upside potential.

Bottom Line on TTD Stock

The Trade Desk is a long-term winner because data-driven advertising is the future of advertising, and this company has emerged as the unparalleled demand-side leader in that market.

Long-term, TTD stock is only going higher.