TTD - ER today

Investment Analysis Clubs Saul’s Investing Discussions
1

Here are my thoughts on how stock may play out today, which along with $2.50 should buy you a Monster Energy drink of your choice. Further below is some previous reasoning I did on why I liked this stock, for those new to it:

  • Stock Action today and after ER -
    I am honestly surprised they are up so far today, but we have seen them tank with an hour to go right before ER’s in the past. (my foggy recollections)

My strategy today, as I have some extra cash, was to buy some more right at the end of today’s trading, leading into ER, if they dipped suddenly below $50. Right now, that is becoming less likely, so I may just leave it alone.

The market has been so unpredictable with earnings, but at least with TTD, if the stock is beaten-down for no reason leading into ER, then I feel the likely beat-n-raise would lead to huge jump in AH. However, if they trend up into the ER, then all bets are off (for me) in that I can easily see 3 different outcomes AH: flat/meh, takes a hit of 5-8%, or skyrockets back towards $60 on a 15-20% gain.

If they somehow miss or have a bad forecast, then not only will I be pretty disheartened, but the stock will be at risk for testing low $40s. I feel this is less likely, given positive results from Telaria (TLRA) and Roku that hint at strength in OTT/CTV and also the strong showings of Netflix and iQiyi (IQ) which hint at continued strength on trends for streaming. Combined with the black eye Facebook took, I wouldn’t be surprised if that led to a modest bump for TTD, although it shouldn’t have impacted Q1 that much, but could play into the Q2 and rest-of-year forecast a bit.

If China/Intl is strong, I think this is a beat-n-raise.

Rest of my port is doing well, so TTD is no longer a disproportionate amount of the overall port, but this is still the company I feel I know the most about, and this is the year I expect to see proof of investment thesis realized a little bit each and every Q.

  • Here are some of my previous thoughts and/or TMF posts and/or Seeking Alpha articles supporting why I like TTD so much -

In 2017 TTD had 52% y/y revenue growth PLUS 6% FCF which equals 58% and crushes the “Rule of 40”. Hard to find many SaaS companies that can match that kind of performance, especially for a company with over $300m in revenues last year and projecting over $400m in 2018.

http://discussion.fool.com/wowwe-have-different-views-of-the-ind…
http://discussion.fool.com/1081/another-tmf-article-on-ttd-today…
http://discussion.fool.com/1081/re-ranking-ttd-on-my-homegrown-c…
http://discussion.fool.com/read-the-cc-transcript-to-answer-most…

Note: the older Seeking Alpha articles appear to require a “Pro” membership on a desktop to read, but if you have downloaded the app, it appears to be free. (at least in my case)
https://seekingalpha.com/article/4123154-trade-desks-ttd-ceo…
https://seekingalpha.com/article/4150489-trade-desk-moment-s…
https://seekingalpha.com/pr/17082513-trade-desk-reports-four…

TTD is in the advertising business. Not comparing them to Google, but when you realize that is how Google makes their revenue, you realize the TAM is huge for advertising…always has been and probably will continue to be. The markets are moving to digital and programmatic. AT&T buying TimeWarner so they can have enough content to stream. Disney buying Fox for same reason. Netflix set the trend and everyone is racing to catch up. Amazon already there with their Prime Video investments. CBS just put their big new Star Trek show on streaming channel. Sling TV is growing, ROKU (more a shovel in this space) is growing, etc etc… On conf call yesterday TTD announced new CTV partnerships with NFL network, FX, TNT, and Travel channel as more examples.

CEO Jeff Green has consistently called out the biggest areas for growth as: CTV, Asia/China, and Mobile. Mobile just grew to be the largest segment of their biz, just surpassing Display for the first time. In Asia, the Google/Facebooks of the world (Baidu/BABA, etc) have partnerships with TTD and are NOT following the “walled garden” model of GOOGL/FB, and they have the largest mobile users and growing middle class in the world. Before you assume China will have new companies that are “The TTD of China” and ruin Green’s plans, you realize that what TTD brings to China, as stated by Green, is the US Brand relationships…so a win-win for China and TTD to partner up.

So if the company has been growing rapidly (which they have) WHILE the market transitions from the legacy non-programmatic model, AND their stated growth market targets have just started to grow from a small base, then you realize that the slowing revenues from more traditional (Display) will be offset by the faster-growing and eventually-larger markets of CTV, China, and Mobile.

You don’t even need Google/Facebook to drop their Walled Garden approach for TTD to be successful, but in the likely event they eventually do, as Green points out Google can better monetize YouTube that way, then you have even more upside.

While not exactly apples-to-apples as switching standards tend to offset each other naturally as companies upgrade over time, an easy way to think about it would be if ANET had never done 100gb and instead had been hot and heavy in 10gb only, with an emphasis on the 400gb market down the road. You would (rightly) point out that 10gb market is not growing as fast as it used to and would point to the 400gb growth as a mirage because it was such a small base.

The move for TTD is not going to be linear (which Green mentioned yesterday on conf call) as it would be for ANET transitioning from 10gb to 100gb to 400gb. TTD is making more of a 10gb to 400gb move. That base will be small for now, but will grow exponentially.

Dreamer

14 Likes
2

looking good…up 14% AH right now…want it to hold. :slight_smile:

press release:
http://investors.thetradedesk.com/phoenix.zhtml?c=254422&…

For the quarter, revenue was $85.7 million, up 61% from a year ago and adjusted EBITDA increased 202% to $18.9 million,

Much of our growth came in channels key to our business such as Mobile, Video, Connected TV, and Audio. Data spend in the month of March spiked to an all-time record. We continue to invest in technology infrastructure, product development, and international expansion. These areas of investment are critical to gaining additional market share. We expect the investments we are making now will help drive our next wave of growth in the coming years.”

Newer Channels Delivering Growth: Two of our newest and most promising channels, Connected TV and audio grew multiples faster than The Trade Desk’s larger and more mature channels:
– Connected TV grew over 2,000% from Q12017 to Q12018
– Audio grew over 650% from Q12017 to Q12018
Strong Customer Retention: Customer retention remained over 95% during the quarter, as it has for the previous 17 quarters.

Guidance - raised!

Second Quarter and Revised Full Year 2018 Outlook:

Mr. Green added: “In 2018, we are off to a great start. The biggest brands in the world continue to shift their advertising spending to programmatic through our platform. As a result, we are raising our 2018 revenue guidance to be at least $433 million. At the same time, we are continuing to make large investments in areas critical to our future. We now expect our adjusted EBITDA to be $133 million for 2018. The secular tailwind of programmatic is strong. Our focus is on gaining share and revenue growth as this will ultimately maximize profitability over the long-term.”

The Trade Desk is providing its financial targets for the second quarter of 2018 and revised targets for its fiscal year 2018. The Company’s financial targets are as follows:

Second Quarter 2018:

Revenue of $103 million
Adjusted EBITDA of $30 million
Full Year 2018

Revenue of at least $433 million (this is about 44% y/y and likely him being conservative)
Adjusted EBITDA of $133 million or about 30.5% of revenue

Now I just need the shorts to go find something better to focus on. Otherwise this $60 price we see tomorrow will just drift down for 3 months and then we rinse/repeat. I am hoping this is enough to establish a new leg up on the way to $70.

Dreamer

4 Likes
3

I saw up over 17% already…seems like a squeeze tomorrow could happen.

The Trade Desk beats by $0.24, beats on revenue https://seekingalpha.com/news/3355414?source=ansh $TTD

4

Here is a quiz for the Saul board, if interested:

Name companies in SaaS space that are growing over 60% y/y after reaching $300m/yr in revenues, and are profitable with solid FCF?

My guess is this is less than a handful, and then look at TTD’s P/S of 7.

Love this founder/CEO, this company culture (ranked best places to work on GlassDoor), the commitment to execution, and they even have a good twitter feed. :slight_smile: https://twitter.com/TheTradeDesk

Up 19% in AH, which may or may not hold, but at $63 currently which is a huge 50% run from the low of $42 on Feb 9th.

Dreamer

7 Likes
5

Really only replying to let you know you are not ignored. I only invest in Saul type stocks with my IRA (so its a small amount comparatively), so I don’t like to say much because it doesn’t impact my overall portfolio much.

But TTD has tested my risk tolerance the past 3 months. I believe in the product, management, and stock AND not much has changed to the story (if anything it has improved). BUT the stock price bouncing has driven me a little bit crazy to where I just started to ignore it (to my benefit today)!

Looks like a win! get on the train :slight_smile:

Robert

1 Like
6

Took a small position late this morning, thanks in no small part to this analysis and obvious enthusiasm. Might become a bigger part of my portfolio sooner than later…

1 Like
7

Name companies in SaaS space that are growing over 60% y/y after reaching $300m/yr in revenues, and are profitable with solid FCF?

My guess is this is less than a handful, and then look at TTD’s P/S of 7.

But is TTD a “SaaS” company? I don’t think their revenue is subscription based.

Bear

8

I had heard it referred that way, but i really dont care and it isnt a designation worth nitpicking over just appreciating their great results and execution.

SaaS companies tend to be looked at a lot as high growth darlings…so compare it to any kind of company you want.

For reference in the future, just type keywords in google and you can quickly find examples like the below:

https://www.google.com/amp/s/amp.businessinsider.com/the-tra…
“To be clear, The Trade Desk doesn’t sell any advertising. Instead, the public company licenses advertisers and agencies ad buying software based on a negotiated percentage of their of media spending , making it a “SAAS” business.”

https://adexchanger.com/data-driven-thinking/the-trade-desks…
"But perhaps the reason you’re asking that is because sometimes you hear noise from other people in the space saying, “Hey, we want to sell license fees because that’s what we hear a SaaS company is.” We believe we’re as much of a SaaS company as any SaaS company, publically traded or privately held.

The earmarks of being a SaaS company are that you sell MSA [master services agreements] or licenses or access to a platform, and that you have recurring and predictable revenue. We think we do that as well as anybody in ad tech. We don’t think we have to transform pricing in order to consider ourselves a SaaS company."

2 Likes
9

Beware battleground stocks that have a tendency to move up AND down while making little overall progress for long periods:

Ebix
Bofi
Criteo
Ttd

10

Man TTD is now up over 41%. The company is doing great but was that quarter 41% great? Kind of thinking some of the shorts are bailing out. I have had a 5% position for about 9 months now. I hate taking short term gains but I don’t see this price holding. I expect it would settle back down into the mid 60’s in the next few weeks… what to do… Knowing when to get out is the hardest part of investing in my opinion.

1 Like
11

I expect it would settle back down into the mid 60’s in the next few weeks… what to do… Knowing when to get out is the hardest part of investing in my opinion.

===

I trimmed to lock in some gains and redistribute as needed or buy back in if it does dip.
I just couldn’t sell it all, as the long thesis was validated again with the ER and conf call.

What helped was modeling future value via my admittedly flawed napkin math.

2017 rev were 300m
currently forecasting 430m, but you have to believe with Jeff Green’s history that is conservative.
So I am guessing 450m for 2018, which is 50% growth.
If that growth continues for 2019, it would be $675m.

Ascribe to those revenues the P/S of your choice and risk tolerance.
If I just use 7, which was the P/S prior to the big move today, it gives me a stock about 50% higher at end of 2019 than it is today. However, if it really does grow by 50% y/y for 3 straight years, I think they will have a higher P/S tied to it.

Is 50% growth reasonable?
The biggest paradigm shifts are CTV, moving to Mobile, and they have a huge focus on Intl/China.
Mobile just became their largest rev segment, so that is checking the boxes and still growing, but also is more mature than the other two areas of focus at this point.

CTV growing at 2100%. A smaller ad-tech company focused on video/CTV, Telaria TLRA, recently reported and showed CTV as 25% of revenues compared to 4% the previous year…also validating the CTV rise in the industry. So this thesis is on track, and as Green described it is in the first inning still.

Intl/China was 15% of total rev for 2017, but is growing at double the US business rate, and Green expects it will continue. So this one is on track also.

I have an analogy to NVDA on NPI board…basically CTV is a bit like autonomous cars…it will be a big leap when mass adoption hits, or as Green is fond of saying “it won’t be linear growth”.

Another comparison for NVDA is their Datacenter business, which has grown rapidly the past 2-3 years. This is on top of core gaming business which has also grown.

TTD core business, outside of CTV, Mobile, and China/Intl, has been digital display advertising. Good news is the world is moving to programmatic, so more and more of the $700b ad market is moving to programmatic budgets. So there is a solid, but slower growing revenue base, but the real explosive growth is in CTV and Intl/China for the next 2 years, imo.

It is very conceivable to me that TTD will have a few Q’s over the next 2 years that hit 60% and even 70% or higher y/y growth as the exponential nature of these new markets kicks in. So I believe at least 50% total rev growth next 2 years is completely achievable.

So far the ER’s in the past year have backed that thesis up each and every time.

Dreamer

5 Likes
12

Thanks for your thoughts Dreamer, I appreciate it. This is one of my highest conviction stocks. I am in it for the long term. I think I will stay in on the roller coaster ride. I don’t think I will try any short term trades. The advertisement business has a lot of competition but I really like what I am seeing.

13

Listen to DreamerDad. This company has it all… Only in the first inning of taking share in what will be a massive $1 trillion market in <10 years. A visionary founder/CEO who is the smartest guy in the room. Retention rate consistently over 95%. 50% revenue growth that will likely accelerate again (Jeff Green said as much last quarter) and profitable! He also said we are at an inflection point of the migration from traditional tv to connected tv and online video. This convergence of the internet and tv is a massive and rare once in a lifetime transition.

Even after the run up today, it’s still only a $3 billion company. This stock has all the makings of a massive long term winner. There is no way I’m selling any of my position (7.5% including leaps).

What’s not to like? I gotta wonder how long before Saul gets on board.

Stay Foolish!

GBF

1 Like
14

Listen to DreamerDad. This company has it all… Only in the first inning of taking share in what will be a massive $1 trillion market in <10 years. A visionary founder/CEO who is the smartest guy in the room. Retention rate consistently over 95%. 50% revenue growth that will likely accelerate again (Jeff Green said as much last quarter) and profitable! He also said we are at an inflection point of the migration from traditional tv to connected tv and online video. This convergence of the internet and tv is a massive and rare once in a lifetime transition.

Even after the run up today, it’s still only a $3 billion company. This stock has all the makings of a massive long term winner. There is no way I’m selling any of my position (7.5% including leaps).

What’s not to like? I gotta wonder how long before Saul gets on board.

Stay Foolish!

I appreciate your perspective. There is massive longer term potential in TTD and patience is key. I had held a medium position for a little while and was debating whether to keep it or put the money into other positions which seemed to have more momentum. Saul’s lack of enthusiasm in TTD gave me second thoughts as well. But I’m glad I stuck around. It’s now a larger position in my portfolio after the rise yesterday. I still have questions about the longer term scenario for this type of company - a lot of unknown risks will probably emerge over time. So I will keep my current position but consider adding if its longer term prospects continue to move in the right direction.

dave

1 Like
15

Ttd charges 20% add on to the cost of the ad. If someone comes along at 10%…

5 Likes
16

Ttd charges 20% add on to the cost of the ad. If someone comes along at 10%…

Not really an argument, otherwise we could just say

Nvda charges “” if someone “”
Arista charges “” if someone “”
Okta charges “” if someone “”
Square “”
Shopify “”

Etc etc…

If it was simply a matter of charging less, then all these businesses can be easily disrupted.

Not sure you were being serious or just trolling, so this is the last i will say about it.

Dreamer

5 Likes
17

I highly recommend that anyone read the prepared remarks for TTD’s earnings call, if you haven’t yet. There is a lot of good stuff in there. Here is a link that should load the .pdf of the remarks.

http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9N…

Thinking to the issues that seem apparent with Tesla at present, and how much Elon Musk would have probably benefited from having an All-Star COO as his right-hand man for 5+ years, I like the CEO Jeff Green discussed overall strategy of The Trade Desk, then the COO discussed operational metrics, and then the CFO discussed the financials.

Here is the conclusion of these remarks from before the Q&A, as a preview:

In closing, let me reiterate that, while we are excited about The Trade Desk’s current performance, we see even more potential for the future. As the worldwide advertising market grows to one trillion dollars, we believe it will move to programmatic. Programmatic is the fastest growing segment of advertising, and The Trade Desk is growing faster than anyone in programmatic. When we see surprises, they’re typically to the upside. There is a generational shift happening with the convergence of the internet and TV globally. Massive markets like China that are just starting to adopt programmatic. And I believe it is highly probable that the programmatic industry in the years ahead will see accelerating growth. We see the opportunity and now is the time to invest to land grab market share and revenue and we believe The Trade Desk will do so in 2018 and beyond.

After reading through these opening remarks, and noting that the share price even accelerated towards the very end of the day Friday, I won’t be surprised if the gap up in price never fills. As of now, I plan to look to add shares to my 4-ish % position if the share price falls back to $63-68, but depending on the price action of the next few days, I may end up deciding to go ahead and add at $72-75.

volfan84
long TTD; long well-run companies, with division of labor; long anonymous data being used for targeted ads

3 Likes