$APP narrative vs. numbers

Yeh The Trade Desk revenues never went negative. Their growth rate may have fallen back which has since re-accelerated (which I think was similar to Google and Meta).

Also by their own admission TTD also benefits from occasional alignment of inconsistent and non-recurring event driven advertising like political mid terms, presidential elections, World Cup, Olympics etc. They usually also try to give a like for like comparison but this isn’t the headline numbers.

Ant

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Perhaps what we have in $APP is basically a turnaround story:

  1. Chapter 1: so-so performance in terms of revenue, effectiveness of AXON etc,.
  2. Chapter 2: AXON II
  3. Chapter 3: $U scores own-goal, Developers flock over to $APP

Will AXON II performance continually improve, resulting in continual increase in profits?
Will they successfully add adjacent revenue stream(s)?

Chapter 4 and 5 are being written as we speak!
What will be written?
Nobody knows!

IMO we should see at least a short-term increase in revenues from the flood of new users that $U gifted to $APP; that buys me some time (downward risk is probably low) to hang onto my existing small position in $APP to see what happens.

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I was talking quarter over quarter. And that was clear from the posting.

APP never went negative yearly either according to Seeking Alpha Financial report but it did have a basically flat year.

But it’s clear I hit a nerve with TTD and I was not trying to say that TTD, which I also own, is not a good investment. I was just discussing the relative advertising results at the time.

APP is a company that IPO’d basically a few months before a massive rise in interest rates, worry about the economy, and a big crash in the market. Flatish revenue that year is not shameful in my book.

Some may call it a “turnaround story” but I don’t see it that way. I see it as a classic pivot story of a technology company into a new, better market. And it appears to be working very well for now.

I agree that it’s still early and risky and clearly not for many of you. We all have our favorites, some of which play out and some of which don’t.

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Hi Mizzmonika - ok got it, you are talking quarterly numbers but…

TTD have had seasonal quarterly dips from Q4 to Q1 since the beginning of time that’s the nature of their programmatic advertising market and that is the only quarterly drop with the exception of the Q2 2020 arrival of Covid. See slide 47 of 51 of this investor deck…

To characterise this as a slow down or growth going negative or even choppy would be misrepresenting one of the most consistent growth at scale investment opportunities we have on offer to investors.

Ant

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You are correct! My bad! I was so focused on trying to figure out what was going on during that tiny period that Bert owned that I didn’t see the forest through the trees.

Ad stocks in general dip in that quarter and then return. But APP had three basically flat quarters in a row. Which is why I imagine Bert got fed up. I do not want to try to read minds here but I think I would have dumped too, especially if I thought a competitor was going to come in and eat the lunch. Fortunately I did not own at that time so I don’t have that “jilted” feeling Bert and rodatl describe.

So here we are left with the situation today.

On the plus side: Clear success thus far in pivoting to the software side from the App side. Five quarters of decent to great growth in both revenues and income, great valuation, and if you are to believe the CEO who has been very focused and consistent, a continued improvement in monetization that will now be moved to new areas (outside of gaming, the internet, CTV). And to add the icing to the cake for me, because I actually believe that seeking alpha quants are somewhat predictive, although certainly not foolproof, a strong buy rating from seeking alpha.

On the minus side: high debt, especially debt to equity (debt to free cash flow about average for my stocks), questionable practice of buying back stock vs. paying down debt, slightly murky numbers re: dollar per install that may or may not be easily explained away by new installations, a flat guide, and a past history of multiple flat quarters in a row before the model was worked out.

Did I miss anything?

I watched for two quarters before getting in so I feel more comfortable getting in now with a 4% position. I would imagine those conservative investors may want to wait another quarter to see whether the story will play out. I do admit this is a bit more risky than other stocks we own, although I believe the valuation reflects this.

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