TTD a buy at this support level?

Investment Analysis Clubs Saul’s Investing Discussions
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Saul seems to have declining interest in TTD and he noted in his end of month update that he was significantly trimming TTD, and then again today he stated he scaled back further and made it his smallest position. Saul has great instincts, so adding to a stock while Saul is trimming is probably akin to catching a falling knife. But I am very attracted to TTD at this price level, nearly $100 below where it peaked at $289.51 just a month ago. Here is why;

I don’t think many members here follow chart patterns, I’m not a chartist either, but I’ve studied it a bit and noticed a particularly interesting move in TTD, which is part of the reason why I am considering adding. Another reason is because I currently have a small position, with a net entry point of $128, and at a 33% discount to its high it seems like it was oversold, so I don’t mind doubling down here. Here is what I am observing…

On Feb 22nd this year, TTD gapped open at $175 after earnings from the previous close at $150, and then shot up to the close at $198, all in one day - a great day if you were invested in TTD that day.

Since then TTD has had three significant pullbacks, and in every case it dropped to about the $180 level before bouncing back every time. Not surprisingly, the most recent pullback took the stock exactly to $180, before bouncing. It appears $180 has become a strong support level where buyers seem to show up and repeatedly stop the slide and bring it back up.

Although I’m not a chartist, certain key patterns like this stand out and catch my attention. I worked with a software developer that built a bunch of screening programs and trade routines for a Wall street institution, and patterns like this make him giddy because he believes these are very clear support levels where Wall street trading programs notoriously flash buy signals.

Of course, I have no clue whether Wall street is flashing a buy signal, but perhaps some more experienced chart readers out there can share their technical analysis. To me it seems this pullback wiping out 8 months of gains, without any major news (except the CEO selling $74 million in stock), was overdone.

Is anyone else thinking of adding here?

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I added twice on the way down, to make TTD my largest holding at 27%. I also added a 4.2% holding in Datadog today. The only thing that gives me pause is the concentration of 3 large customers for TTD according to cheesehead. The 27% comes mainly from a purchase way back when TTD was just getting rolling.

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Is anyone else thinking of adding here?

I was considering adding but TTD is already a large position for me at #3 in my portfolio (growing from #8 without adding). It’s still only less than 8% since I am more diversified than Saul and some others here.

I am also a little leery of adding to or holding steady on a stock that Saul is trimming. But I don’t see any fundamental weakness. And the valuation at an EV/S of 12.5 times this year’s projected revenues seems reasonable in comparison to its growth cohort. It is projected to have slowing revenue growth from just over 50% to just under 40% this year. On the other hand, it hasn’t shown any significant sign of slowing thus far with 50% yoy revenue growth last quarter and it typically beats estimates by varying degrees. So I have mixed feelings about it. And I don’t have any free cash right now after adding to a few others and starting a position in DDOG.

I will wait and see. I might add a little if support is clearly established. Otherwise, I will just hold.

Dave

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perhaps some more experienced chart readers out there can share their technical analysis.

This board doesn’t focus on chart and technical analysis, but instead on the fundamentals of a company. For TTD, these are as follows:

  • founder led
  • yoy revenue growth of 40%+
  • gross margins of 75%+
  • zero debt
  • formerly closed “walled garden” of Amazon now partners with TTD
  • CEO Jeff Green expects more “walled gardens” to join open internet
  • connected TV spending increasing rapidly, and is the “number one point of discussion” with advertisers according to Green
  • on the most recent earnings call, Green stated that programmatic ad spending is increasing 5x faster than traditional ad spending
  • global ad spending was $725B, whereas programmatic ad spend was only around $35B, so we are still in the early innings
  • “race to zero” already in full effect…$12/mo for Netflix > $8/mo for Disney+ > $5/mo for AppleTV+
  • the loss in subscription revenue has to get replaced by something (hint: its ad dollars)

I’m long TTD.

Brandon

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I am also a little leery of adding to or holding steady on a stock that Saul is trimming. But I don’t see any fundamental weakness. And the valuation at an EV/S of 12.5 times this year’s projected revenues seems reasonable

Dave makes good points here, but it’s even better because this is the rare bird where we can use PE as well as PS (or EV/S). In the TTM period, The Trade Desk has earned 3.18 per share. (In the twelve months before that, 1.83.)

This gives them a PE ratio of 59. Not unreasonable for a company growing revenue at 40%+ and growing earnings even faster.

Personally, I sold out of TTD on 9/9 when everything was getting trashed and they were still holding up (at $227/share). Since TTD fell, I bought a decent amount back, although it’s still a small position. Now especially, with everything else coming back, TTD looks relatively like a bargain.

I realize that it’s been kind of wild to sell a few weeks ago and then now I’m buying back, but in my opinion that’s what you need to do when the market gets wild: look for the opportunities it’s giving you.

Bear

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Saul seems to have declining interest in TTD and he noted in his end of month update that he was significantly trimming TTD, and then again today he stated he scaled back further and made it his smallest position. Saul has great instincts, so adding to a stock while Saul is trimming is probably akin to catching a falling knife.

Hi Solo,
I have nothing against Trade Desk, and indeed, it’s still a 4.7% position, which is large for some people. Its last report was excellent. It’s just that it’s in the advertising field, and it’s a complicated picture with everyone from Amazon and Google involved on the one hand and Roku on the other. So when I was looking for money for clearer and cleaner stories, I trimmed it. No falling knife. Honest.
Saul

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$8/mo for Disney+ > $5/mo for AppleTV+
- the loss in subscription revenue has to get replaced by something (hint: its ad dollars)

I’m confused, aren’t DIS and AAPL adding sub revenues, not losing them?

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I’m confused, aren’t DIS and AAPL adding sub revenues, not losing them?

That is my take as well. These are new subscribers for Disney and Apple, as opposed to falling revenue from existing subscribers. And the reason why both services come in cheaper than Netflix is purely one of the amount of available content. Put bluntly, the Apple service is simply not worth more than $5 per month (to me, so far, it’s worth zero). I think the OP was implying that the price of streaming services is in a race to zero and therefore will require ad dollars to keep the streaming lights on. I don’t necessarily agree with that. I don’t think Disney+ is going to force Netflix to lower their price, for example.

What would be interesting is to look at the ratios of paid (or premium) versus free (or discounted) subscriptions for services like Hulu, Spotify, etc. We are premium members of both services, for example, because we don’t want the ads.

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Bill,

You know Tech analysis is OT and not allowed on this board.

How dare you just break the rules and post something to start a TA discussion! IF YOU WANT TO TALK TA, GO TO A TA BOARD!

PLEASE DO NOT CONTINUE THIS THREAD!

Saul

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CMFSoloFool wrote:

"Of course, I have no clue whether Wall street is flashing a buy signal, but perhaps some more experienced chart readers out there can share their technical analysis. "

I chose to participate by answering a request,Saul.

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Understand Bill, but respectfully, all you had to do was answer the request privately and that way it’s in keeping with the rules of this board and therefore un-cluttering it at the same time.

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all you had to do was answer the request privately

The downside of replying privately is that one is revealing one’s e-mail address.

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Hi Solo,
I have nothing against Trade Desk, and indeed, it’s still a 4.7% position, which is large for some people. Its last report was excellent. It’s just that it’s in the advertising field, and it’s a complicated picture with everyone from Amazon and Google involved on the one hand and Roku on the other. So when I was looking for money for clearer and cleaner stories, I trimmed it. No falling knife. Honest.
Saul

Thanks Saul. I guess today we are all being rewarded by the RBC analysts that upgraded the stock. So, it appears TTD is not a falling knife after all.

Now, had I followed through with adding, I’d be a fair bit richer right now. That’s the price of having a job and being out on travel. Oh well, I’m still enjoying the bump >6% hike today.

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