Headquartered in Ventura, California, Trade Desk (NASDAQ:TTD) provides a self-service platform to manage advertising campaigns. It’s a timely service in the digital age, and prescient traders who bought TTD stock years ago are now enjoying strong returns.
On the other hand, Trade Desk shares haven’t performed well in 2021 so far. Indeed, a recent stock-price pullback might have scared some folks out of the trade.
I believe it’s a mistake to abandon TTD stock altogether. If the share price comes down enough, an investment could present a highly favorable reward-to-risk profile.
Besides, there’s data showing that Trade Desk still has plenty of customers and is able to rake in strong revenues. In other words, if the price is right, Trade Desk could still be a tech-enhanced business to bet on.
A Closer Look at TTD Stock
After plunging to the $160 area in March of 2020, TTD stock commenced a rally of epic proportions.
The top of the move happened on Dec. 22, when the stock reached a breathtaking 52-week high of $972.80. However, that rally was a case of “too much, too fast,” and a sharp retracement followed.
A series of lower highs and lower lows brought TTD stock to around $600 on June 14. Now, that certainly might sound like a terrific bargain.
Yet, even at the reduced price point, Trade Desk still has a trailing 12-month price-earnings ratio of 124.
Value-focused investors might balk at the idea of owning a stock with such a high P/E ratio. Therefore, they might choose to wait until the share price pulls back some more.
The First Split
Before delving into the company’s financials, I believe it’s important to take a detour into a notable event.
Trade Desk just completed a 10-for-1 stock-share split. Thus, every dollar amount mentioned so far should be considered with that adjustment in mind. Trading of TTD stock began on a split-adjusted basis today.
It’s a long-overdue move, I believe. As Trade Desk co-founder and CEO Jeff Green observed, the company’s share price increased by roughly 2,100% since Trade Desk’s September of 2016 initial public offering. Interestingly, this represents the company’s first-ever stock split. In my experience, I’ve found that stocks tend to go up over time after forward stock splits (though not after reverse splits).
Don’t misunderstand. I’m not recommending randomly buying stocks after they forward-split.
The most important thing (besides waiting for the stock to come down to your chosen price point) is making sure that the company is financially on solid ground.
And thankfully, there’s ample evidence that Trade Desk is doing well on that front.
“We delivered outstanding performance in the first quarter, once again surpassing our expectations,” Green declared as Trade Desk revealed its first-quarter financial data.
He’s not wrong about that. The chief highlight of Trade Desk’s first-quarter 2021 GAAP results would probably be the $219.8 million in revenues, up 37% year-over-year.
Moreover, Trade Desk observed that its customer retention remained over 95% during the first the quarter, just as it has for the previous seven years.
The Bottom Line
All in all, it’s fair to say that Trade Desk is still a strong revenue generator with a demonstrated ability to keep its customers coming back.
Will more people invest in TTD stock now that the stock split? Possibly, but you don’t have to jump in immediately.
Instead, you can choose to let the share price come down a little bit lower. Then make your move, if you’re ready.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.