Cord-Cutting and Revenue Data Make the Case for Trade Desk

Among the most successful businesses in the digitized economy is Trade Desk (NASDAQ:TTD), which provides a self-service, cloud-based global technology platform for buyers of advertising. It’s a great business to be in, and this is clearly reflected in the TTD stock price, which rose 208.3% last year.

TTD stock

Source: Shutterstock/ Bella Melo

How did TTD stock triple in 2020? Without a doubt, the onset of the novel coronavirus was a factor. The technology sector generally performed well as digital forms of communication became essential.

Yet, TTD stock’s ascent is more than just a tale of the broader tech sector’s success. Trade Desk is a thriving business as the company is successful in leveraging a notable renaissance in targeted, data-driven advertising.

In other words, Trade Desk has a terrific business model, and TTD stock’s run-up is fully justified. Now, it’s just a matter of determining whether the stock’s upward momentum is likely to persist — and indeed, I would argue that it will.

TTD Stock at a Glance

A brief dip in a long-term uptrend can present a prime buying opportunity. TTD stock offers a textbook example of this principle in action.

On Dec. 22, TTD stock reached a 52-week high of $972.80. Since that day, the share price has declined. More specifically, TTD shares opened near the $850 level on Feb. 9.

That might sound like bearish price action, but we also need to look at the bigger picture. A year ago, TTD stock cost less than $300 per share. Besides, at its recent low point in March of 2020, Trade Desk shares traded for just $136.

This long-term upward trajectory indicates that the trend still favors the TTD stock bulls. History has shown that the dips in Trade Desk are quite buyable, and if there’s a pullback, then fear isn’t the appropriate emotion.

This doesn’t mean that you have to load the boat on TTD stock. I just wanted to provide some perspective for folks who were already considering buying the shares, but perhaps were deterred by recent price moves in the stock.

Cutting the Cord

Before we get to the company’s blockbuster fiscal data, I wanted to report on a significant trend in advertising-consumer behavior.

In particular, more people have been cutting the cable cord lately. This benefits Trade Desk as the company’s focus is on internet and streaming-based modalities of advertising.

As Trade Desk reports, 27% of U.S. cable television subscribers plan to cut their subscriptions by the end of this year.

That figure is much higher than the 15% of cable subscribers who reported cutting their cable subscriptions in 2020. All of this is based on a survey of more than 2,100 U.S. consumers.

Trade Desk Chief Revenue Officer Tim Sims further notes that “less than 50 percent of U.S. households today have a cable subscription.”

In Growth Mode

This suggests that cable television advertising might not be the best way to reach targeted audiences — and this leaves room for Trade Desk to expand its services amid a favorable environment for digital advertising.

Moreover, as InvestorPlace contributor Luke Lango observes, “digital ads account for 54.1% of total media ad spending. That number will rise to 60% within the next 2-3 years, 70% within the next 5-7 years, and 80% or higher by 2030.”

And as the digital advertising niche is in growth mode, so is Trade Desk’s revenues. Notably, the company’s third-quarter revenues increased year-over-year by 32%.

Plus, Trade Desk’s mobile video and audio segments both marked 70% year-over-year spend growth. On top of all that, connected TV ad spend on the company’s platform doubled on a year-over-year basis.

The Takeaway

The skeptics can worry about a price dip in TTD stock, but they can’t dispute the data.

And the data clearly indicates that people are cutting the cord and embracing digital media — and that’s net bullish, no doubt, for Trade Desk.

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.

Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. 

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