TTD announces earnings on May 9th.
In the last earnings call, TTD mentioned their investment in China, and that they were going to spend the money and “do it right” for the long haul. In other words they couldn’t just plug in their existing setup, but that they had to set it up according to different standards on the other side of the China “wall.”
Will this cause a slowdown in revenue or affect the quarterly numbers somehow? Maybe.
If the stock drops I will add 2021 Leap call options to my shares.
There are many upcoming 2020 events that I think will add to ad spend. (2020 Olympics, US election, Euro nations Soccer (UEFA Euro 2020), America nations Soccer (Concacaf))
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Q1 is historically the slowest quarter for TTD on a sequential (QoQ) basis. The sequential slowdown in turn has historically led to the highest YoY growth in Q1. They guided to 116 MM. The market is expecting 117.13 MM, which gives:
+37% yoy revenue growth (compare to +60% in 1Q 2018 and +76% in 1Q 2017)
-27% sequential revenue growth (compare to -16% in 1Q 2018 and -26% in 1Q 2017)
The +37% yoy and -27% sequential revenue growth will both be the slowest 1Q growth on record for TTD, based on the expected 117.13 MM. But we all know they will beat guidance (let’s hope).
Others on this board, much smarter than me, have advised against basing decision on guidance. TTD regularly crushes guidance. Hopefully they were very conservative with the 116 MM.
For fun, I went back and checked their revenue guidance vs actual.
Their quarterly revenue has exceeded guidance on average by 11%. They are:
Q4 2016 +17%
Q1 2017 +24%
Q2 2017 +9%
Q3 2017 +4%
Q4 2017 +2%
Q1 2018 +17%
Q2 2018 +9%
Q3 2018 +2%
Q4 2018 +9%
Q1 2019 ??
If we take the +17% exceedance in 1Q2018 as a best upper limit scenario, they will post upwards of 135 MM and will match the 1Q2018 -16% sequential growth, which would give 58% yoy and would be an absolute blowout. If we take the +11% average exceedance as a hopeful scenario, they would post about 128 MM, -20% sequential, and +51% yoy, which I think would still be considered a blowout. Anything between the expected 117 and 128 should be met with a favorable reaction. Anything south of 117 MM, I think it could get ugly.
This is my second post on this board. Hopefully this is all on-topic. I know we don’t care much about guidance around here but I thought this might be interesting. Looking at the historical results gave me a bit of confidence to add some more today. We’ll see what happens on Thursday.
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If we take the +17% exceedance in 1Q2018 as a best upper limit scenario, they will post upwards of 135 MM and will match the 1Q2018 -16% sequential growth, which would give 58% yoy and would be an absolute blowout.
I stopped reading at this point… 
Hoping for the best!
I do think there is some basic reasoning to the “beats” being larger in Q1:
- I think this allows them to get the year off in positive manner.
- Usually the Q4/EOY ER is deeper into the following Q1, giving them very good visibility on the likely Q1 final number. I think Green said something like “we have never been more bullish” on the company’s prospects, when asked on Q&A about guidance and 2019 in general.
- Tied to #1, this allows them to provide a big guidance raise for full year 2019. Then they can just incrementally raise full-year guidance in Q2 and Q3 ERs. That is how 2018 played out, at least.
Of course, this all assumes very good visibility to deals and revenue…it may have just been blind luck that the previous best beats occurred in Q1’s.
Given the mammoth runup in TTD since May 2018 ER, I am not expecting a 20-30% type pop like we have seen before. I will gladly take a small-to-flat bump vs a sell-the-news plunge.
The timing with this China Trade War FUD is not ideal, but might work out ok…for some reason I feel better about post-ER pops when a stock isn’t screaming into the ER at an ATH…so the past 2 days has shaved just a bit of the froth off of TTD’s stock price. Plus, China should be in town on Thursday for trade talks, and we may see a change in tone and hand-holding and kumbaya by then.
News sentiment changes on a dime, it seems.
Dreamer
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Guy, I think your posts have been fantastic. Looking forward to more.
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