Some questions for the TTD experts

Investment Analysis Clubs Saul’s Investing Discussions
21

I think this is a fascinating company I need to learn more about, and has great potential like SQ and TWLO, but I have the same question I usually have with these names which is the lack of discussion of valuation. TTD has earnings, actual earnings, which is great!

However, it is already valued at 100x PE, 53x PE19, and over 10x sales. It’s tripled in 6 months.

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22

TTD was short covering as short interest was hi going into er.

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23

Saul - I would say the key point out of everything are:

  1. Massive uptake in Singapore and Asia - I have brought this point before here having seen their impressive offices and met some of theirs and industry staff
  2. Expectations were low - short % was high and also TTD was in the penalty box due to Criteo and some of the other Ad Tech problems surrounding mobile ad blocking, if you look at the P/S and EV/S then clearly they were way under-rated and have only just come back into line as far as valuation goes
  3. Massive uptake by connected TV and other key growth areas

A

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24

A balanced summary of TTD this year.

The Trade Desk’s Monster Quarter https://seekingalpha.com/article/4198795?source=ansh $TTD

Covers most of the points raised here, including current valuation

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25

Very interesting article re: 70% profit margins of advertising for AMZN compared to their 40% margins on AWS. Article postulated that AMZN’s advertising could become bigger profit center than AWS by 2021.

Easy to see the competition in the TAM heating up between TTD and AMZN. Article even references AMZN upping their ad game by developing ad tools that help customers buy ads.

“…Advertising can have even higher profit margins than Amazon’s cloud-computing business – see Facebook and Alphabet’s core businesses. In fact, Amazon’s ad business could produce more operating profit than AWS by 2021 , according to analysis from Piper Jaffray. That’s quite impressive for a business that produced about $4 billion in revenue last year compared to AWS’s $17.5 billion.

Adding to Amazon’s challenges, its ad business is built on several legacy platforms that aren’t nearly as easy-to-use as Facebook or Google’s ad purchasing systems. On the company’s second-quarter earnings call, CFO Brian Olsavsky said the company is working on “improving the usability of our tools,” increased automation of the ad buying process, and improving its measurement capabilities.

…Last month, Amazon introduced some advertisers to a new unified purchasing system for all of Amazon’s ad products, according to a report from Digiday. The system makes it easier to buy various ad products and track their effectiveness. If Amazon can successfully roll out an easy-to-use purchasing system to rival those of Facebook and Google, it will go a long way toward encouraging new advertisers to use Amazon’s ad platform, particularly less sophisticated advertisers like small businesses.

…Advertising sales on Amazon could produce an operating margin of around 75%, according to Piper Jaffray’s analysis. For reference, Facebook produced an operating margin of 44% last quarter, but it warned that will decline as it invests more in security and other initiatives over the next year. Google’s operating margin was 28% last quarter, but that includes its growing hardware segment.

…So, $20 billion in advertising revenue could be worth as much as $60 billion in cloud computing revenue in the near future. And that’s what Piper Jaffray’s analysts are pointing out as a very real possibility for Amazon’s business in 2021.”

https://www.fool.com/investing/2018/08/14/amazons-most-profi…

sjo

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