The Trade Desk’s recent earnings report has been discussed here recently and the numbers were pretty good. Granted, sequential revenues were down; but for TTD, they always are in Q1. YoY revenues grew 37%. For Q2, the company projects a 19% sequential and an 87% YoY revenue increase. You have to go back to 2016 Q3 for a YoY increase that comes close to the projection.
Another matter which has not received much attention is the 10 for 1 stock split. While stock splits in themselves don’t create value, they can have the effect of increasing stock purchases and stock prices. There are two reasons for this. One is that small investors find lower stock prices more attractive. Another important reason is that option traders are more attracted. TTD has high IV options which fetch an attractive premium. But when the stock is priced at $500 per share, a covered call writer must invest $50,000 to sell one covered call. That’s pretty serious money. With the 10 for 1 split, a trader need invest only $5,000 and it’s probable that those who like to write covered calls will be attracted to TTD. Many covered call writers are conservative investors who invest for the long term. Conversely, covered put writers tend to support the stock price in a decline because they may be assigned the stock at a higher than market price.
Rightline.net states that stock splits have salutary effects for next 3 years after the split. http://www.rightline.net/splits/
“A 1996 study by David Ikenberry of Rice University measured the short and long-term performance of stock splits. His research included all the 1,275 companies whose stock split 2-for-1 between 1975 and 1990. Mr. Ikenberry compared the split stocks to a control group of stocks for similar-sized companies in similar sectors that had not split. His results were startling. The split stock group performed 8% better than the control group after one year, and 16% better after three years.
In August 2003 Mr.Ikenberry - now Chairman of the Finance Department at the University of Illinois at Urbana-Champaign - updated the stock split study. This time he looked at companies from 1990 to 1997. Using a similar methodology that included 2-for-1, 3-for-1 and 4-for-1 stock splits, he found the results were essentially the same. Shares of split stocks on average outperformed the market by 8% the following year and 12% over the next three years.”
See a 2018 MarketWatch article that updates some of this information at https://www.marketwatch.com/story/heres-the-real-reason-why-…