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.
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)
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.