What to make of digital advertising company The Trade Desk (NASDAQ:TTD) stock after its recent 10-for-1 stock split?
The split, executed on June 17, brought the share price of The Trade Desk down to about $60 from just over $600 previously. Retail investors have been quick to embrace TTD stock at its lower valuation, bidding the share price up around 40% to its July 28 start of $83.20 since the split. However, even with the recent run-up, The Trade Desk’s stock is only about 6% better on the year. But now, with the stock split behind it and online advertising rebounding as the economy comes roaring back it looks like further gains are ahead for the Ventura, California-based company.
Market Opportunity
The Trade Desk develops a proprietary software platform that’s used by ad buyers to purchase digital advertisements across a range of online formats and devices. The digital advertising market continues to grow at a brisk clip driven by an ongoing proliferation of mobile devices, connected television sets and online channels. The online advertising market is forecast to reach $1.09 trillion by 2027 for a compound annual growth rate (CAGR) of 17.2% between 2020 to 2027.
In such a growth environment, demand for The Trade Desk’s software platform is only going to grow. Not that The Trade Desk hasn’t been growing strongly already. Despite its pullback this year, TTD stock has increased more than 2,500% in the last five years. In 2016, the company’s share price was below $3. The Trade Desk’s stock continues to grow in tandem with internet advertising, which remains the fastest growing segment of the entire advertising industry.
TTD Stock Growth Strategy
The Trade Desk isn’t sitting still. The company continues to execute on an aggressive growth strategy that includes an expansion outside the U.S. The Trade Desk is currently pushing sales of its software platform overseas in Europe and Asia. Clients in the U.S. and Canada currently account for nearly 90% of The Trade Desk’s sales. The international market offers enormous growth potential. Chief Executive Officer Jeff Green has put a special focus on international growth, saying it will carry the company forward in coming years.
Additionally, The Trade Desk is entering into strategic partnerships where it makes sense to do so. The company has partnered with Walmart (NYSE:WMT) on shopping advertisements, with plans to introduce a new advertising technology platform that will enable marketers to better target retail advertisements and measure their impact with consumers. Walmart is the world’s largest retailer, and this arrangement will no doubt help The Trade Desk capture a larger share of the shopping advertisement market.
Upgrades and Earnings
The Covid-19 pandemic only accelerated the move to online advertising. This increase, coupled with the ascension of internet-connected television sets, has given a lift to The Trade Desk’s earnings. The company’s revenue rose 26% in 2020 from 2019, and was up a further 37% year-over-year in this year’s first quarter. The Trade Desk’s net income in the first quarter came in at $22.6 million. The strong and consistent earnings have helped keep TTD stock buoyant since the company’s initial public offering on September 21, 2016.
Now, with the stock split successfully executed, The Trade Desk is rolling out a significant upgrade to its advertising software platform this month. The upgrade promises new features that are designed to simplify the user experience, automating many of the capabilities. There will also be new data that can help users improve their decision making. The upgrade is being billed as The Trade Desk’s largest ever product launch.
Buy TTD Stock Now That It Is Affordable
While it is true that stock splits don’t change the underlying fundamentals of a company or its shares, they do make it more affordable for investors, particularly individual retail ones, to buy in. This is certainly the case with The Trade Desk. It’s much more affordable to purchase TTD stock at $75 than at $750 per share. Given the massive market opportunity ahead of the company, its continued growth and product innovation, investors would be smart to take advantage of the recent stock split and grab shares before they become expensive again.
On the date of publication, Joel Baglole 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.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.
