The Trade Desk

Investment Analysis Clubs Saul’s Investing Discussions
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The Trade Desk announced earnings after the close yesterday. I was busy still analyzing and reading conference calls from Square and Alteryx from the Wednesday’s news (I have another life too), but I took a fast look and TTD’s release and thought it looked very very good, and the price was down like 12% or something, maybe more at $106 in the aftermarket. It took me a few minutes to raise some cash and by the time I added to my position I got a price of $108.00. As I look now, the price is back up to $124, and up $16 or 15% from my purchase in the aftermarket, and that’s not up 15% over a period of days. We are only an hour and four minutes into the trading day! That’s 15% in one hour of one trading day.

Lesson? The market gamblers (and maybe machines) have gotten into the habit of selling off any stock, no matter how great the results they announce, on the basis of “disappointing guidance”. But they seem to rely on the guidance numbers, not the enthusiasm of what the companies are actually saying in words about their business. That gives us unsophisticated humans a great chance to take advantage of our brains, and of what the machines and the day traders are not listening to, which I happened to do yesterday afternoon.

Best,

Saul

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Thanks, Saul! I was hoping you would look at TTD and weigh in.

I have a sizable position in TTD. I had looked at all the analysis and opinion mysel, coming to the same conclusion, and added about 10% at 115 this morning. It’s now up to 126. I wish I had added more at that price but glad I got a decent price.

We’ve had a few interesting market reactions to other earnings reports and I am eager to hear your take on these as well.

Cheers,

dave

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Bought before the close yesterday. That is now up. Bought at 106.70 in AH after reading the press release. There is nothing wrong here and much to be pleased with.

I would have been happy to buy more if it got punished further today. Now likely my largest position.

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Saul,
My conviction in TTD is strengthened with you on board the train! :slight_smile:

In future, try and catch the live CC if you can, as I think you will be very impressed with CEO Jeff Green. The conf call is still a good read either way:
https://seekingalpha.com/article/4220235-trade-desks-ttd-ceo…

In the Q&A, the very first question seemed to try and pry out of Green if he had any concerns on growth in 2019, as the analyst had heard other SaaS companies shy away from committing to whether the future was rosy or not. I loved Green’s response:

"Brian Schwartz

Yes, hi. Thanks for taking my question this afternoon. Congratulations Jeff, Rob and Paul on a terrific quarter here. Jeff, you mentioned a couple times here. You’re more bullish about 2019 and that’s quite a divergent from the other SaaS companies that I’m talking to who really aren’t willing to talk about 2019 yet. You did a good job giving us some of the company specific trends that you have are looking positive. It looks like the share games are happening faster, the metrics are supporting that.

The question I want to ask you, just based on the customer conversations that you have going on. When you think about 2019 and you think about that big digital advertising pie that’s out there. Do you see tailwinds or headwinds out there for next year? Thanks.

Jeff Green

Awesome. Thanks. Really appreciate the question. It’s always a really important time of the year where we’re prepping for 2019 or prepping for the next year. And let me give you some of the things that I think to answer your question very specifically, which are – and I’ll just – I’ll skip to the end of the book, which is we had the winds at our back. We’re in a better position than we’ve ever been at this point in the year with more confidence than we’ve ever had at this position in the year.

So the first thing is, just looking at our own performance, it’s pretty remarkable than in Q2, we equaled our growth rate of 2017 and in Q3, quarter-over-quarter meaning Q3 2018 over Q3 2017. We once again equaled our growth rate, which given that we’re making much bigger numbers at this point, that we’re very proud of that and that outperformance, even our own expectations. But it goes even further when we guide today that for Q4, we expect to accelerate and do grow faster this year than we did last year.

And that is in part because of some of those numbers that we talked about that are the winds at our back. And maybe the two most exciting or just the channels where all the growth are coming from so first mobile, the fact that 46% of our revenue came from mobile and that mobile video, which is one of the most exciting channels will ever see, grew by 100%. And then connect the TV once again, growing at 10x a data growth where anytime people are making data driven decisions, we think that is good for us because it means that once they compare a data-driven choice to a non-data driven choice, which I think is most of advertising still, it just makes it to the house always wins like that’s always in our favor.

And the fact that our data spend grew so much and data usage as a whole went up by even more than that. Suggest that the winds are even more at our backs than we thought. So with all of those things happening, we’re more confident for 2019 than we ever were. And I compare that to a year ago when we’re looking at the next year. It’s just night and day difference in terms of our competence."

Dreamer

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What intrigues me, Saul, is that after reading SQ, AYX and TTD at about the same time, you jumped into TTD. I thought SQ Q3 was good too and management probably sandbagged Q4 and 2019 a bit. I don’t see what warrants a 10% haircut for SQ yesterday.

Could you explain what you saw in SQ ER/CC that did not prompt you for an action? Greatly appreciated as always.

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twould you care to comment on ayx as well? There is no 'disappointing guidance" per se. Robust growth, 2x intl business, 90% GM, and again over 130% Net Retention. Yet the stock price barely moved.

What’s your take on this? You don’t use P/S or EV/S so what are the factors you considered re AYX?

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I think it’s because of the excitement that you can feel in the CC of TTD

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Saul:
it looked very very good, and the price was down like 12% or something, maybe more at $106 in the aftermarket. It took me a few minutes to raise some cash and by the time I added to my position I got a price of $108.00.

TTD is one of my tracked companies.

I have been using Yahoo’s finance page for historical pricing data for decision making; their data for TTD for 11/8 says $121.04 was the daily low. Obviously not reflecting the after market reality of under $110.

Where is the site I can depend on for actual daily LO figures? (It doesn’t appear to be Yahoo finance.)

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What intrigues me, Saul, is that after reading SQ, AYX and TTD at about the same time, you jumped into TTD. I thought SQ Q3 was good too and management probably sandbagged Q4 and 2019 a bit. I don’t see what warrants a 10% haircut for SQ yesterday.

Could you explain what you saw in SQ ER/CC that did not prompt you for an action? Greatly appreciated as always.

Hi Hermione,
That’s easy. Square is my third largest position already and is 14% of my portfolio. That’s already a lot. TTD is new and was only about 3.6% when I added (and now about 4.6%). Also I had added a little to Square last week at about $70.25. On the other hand, at $108, TTD was lower than I had ever been able to buy it. I just grabbed it.
Saul

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Good grab at $108.00…you beat me by $4.00 but not complaining on a down day!

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twould you care to comment on ayx as well? There is no 'disappointing guidance" per se. Robust growth, 2x intl business, 90% GM, and again over 130% Net Retention. Yet the stock price barely moved.

I just answered that in #48295

Because it was up 10% the day before, on Wednesday, when the market exploded. So on Thursday, after earnings, it dropped 1% on a market-down day. Meaningless.

Saul

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All,

If you have the time to read Jeff Green’s opening commentary in his earnings report, I highly recommend that you do so.

(1) You will know that most of their business comes from Ad agencies. I’ve always wondered when that would switch ---- and TTD would begin to go more “direct”. That is clearly now beginning to happen more materially ---- so much so, that Jeff is speaking to it out loud.

From Jeff:
“We’re also excited to report that we signed up three more of Ad Age’s, top 200 global advertisers. This includes one of the biggest retailers in the U.S., a huge multinational consumer technology firm and one of the biggest global beverage companies in the world. By doing so, these content owners are eliminating many steps in the distribution channels and are monetizing their ad inventory more directly and efficiently. We expect to work with any TV cable or online channel who wants to have a direct relationship with consumers.”

Love that.

(2) cTV is super hot. Jeff indicated “we’ve never seen it an opportunity like CTV before and I don’t think we’ll ever see one like it, again. It is the biggest opportunity we’ve ever seen probably ever will.” With TTD’s varying partnerships, they are poised to win…

(3) Walled gardens. Jeff says this:

“Facebook is where people go to buy Facebook and Google is where people go to buy Google. Amazon is where people, go to buy Amazon, but the Trade Desk is the place where people go to buy everything else worldwide. That’s why a recent study by advertiser perceptions showed The Trade Desk ranked third right after Amazon and Google in overall demand side platform usage last year by surveyed marketers and advertising agencies.”

Think about that folks. Already third on demand side. The world doesn’t just visit Amazon, FB, Google. We visit hundreds of other non-walled garden web-sites. TTD is protected against the “I don’t use FB any more” thinking ---- as they have thousands of sites on the supply side. TTD wins longer term.

(4) Privacy. TTD doesn’t keep personally identifiable information. They can auction to advertisers that you want to present their golf products to 40 year old males in this geographic area ---- and the beauty is thatt TTD doesn’t keep those 40 year old names or other PII in their platform (like FB, AMZN do as examples). This is helping them actually win business in Europe given GDPR. Read it this way folks ---- TTD is now at the point where regulation is helping them win business. Can FB and GOOGL say that?

(5) Jeff spoke throughout the earnings report re: the international opportunity. Frankly, I disagreed w their approach to this last year and was wanting them to focus on US first. I’m glad to eat crow on that. China is their smallest market today yet Jeff feels it will be his biggest some day. They are partnering w the three BATs of China ---- which is how you win in China. Jeff also spoke to how Spain, Indonesia, UK, Germany, Australia and other markets were all performing at record levels. PS, have a look at the breadth of roles they are hiring for and geographic footprint of ---- https://www.thetradedesk.com/careers/open-positions.

(6) Omnichannel. This quote from Jeff says it all:

“Over the last year we integrated multi-channel campaign capabilities in our platform in a practical, actionable way. Now, one third of our customers are buying inventory in five or more channels on our platform. And like in the past quarter, we see much of the incremental revenue from their increased spend going straight to the bottom line. Our multi-channel proficiency enhances our position and reputation as the independent alternative to the walled gardens.”

Look, I could keep going on this company, but I’ll stop for now. Full disclosure, TTD is my largest position. I’ve been adding recently and feel I should be adding more. Have bought 7 times since May 2017 and am up on average 60.19% w the first purchase being up 134%.

Jeff is building a juggernaut here. Hey Saul, is that one of your categories?! PS, jazzed to see Saul buy into this ---- even though ad tech (I believe I heard him say) has been an area he has been burned.

I’d love to see Saul’s financial analysis of this company ---- Saul I always love that work you do. And now own many of the equities you’ve mentioned. ZS is my third largest.

Best wishes to all,

Jay

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thank you for sharing this Jay.

i have been burned multiple times with adtech companies… almost everyone of it… and been in and out of TTD couple of times… thanks to people like you and others on this board, i have bought into TTD lately and its been good so far.