TTD reports Q3

Investment Analysis Clubs Saul’s Investing Discussions
21

“* Trade Desk Inc : Jefferies cuts target price to $210 from $270

  • Trade Desk Inc : Oppenheimer cuts target price to $260 from $290”

And another cut it from 290 to 240.

If we both believe that in the next year TTDs stock price will do what these analysts say then I’ll assume that the stock price will be somewhere between 210 and 260.

In this insane market where growth is being sold down, when value is now leading the market, at all time market highs, entering the reality show of an election year, I’ll take it.

Not selling a share. Buying on dips.

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It wouldn’t be the first time an analyst used an earnings call to move their price target closer to the current price.

But this was in in-line quarter. There really isn’t any reason for the stock price to move very much in either direction based upon the results. For those (rightly) worried about a severe drop in the stock, those fears are addressed. It really doesn’t make sense to move the price targets much either.

I think its fairly valued. I’ll take a great company with a long growth trajectory that is fairly valued.

Thanks,
Rob

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23 
This is my first attempt to insert a table into a post so it could be a mess but here goes.

I was curious to know how TTD's performance compared to ROKU and two other DSP/SSP providers that have been mentioned on this board.  Rather than go crazy and measure everything, I only looked at growth rates and, if possible CTV growth rates.  

All experienced a drop in growth rates with ROKU and TTD slowing the least despite their much larger size.  Like others, I regained confidence with TTD's earnings call and also felt confident with ROKU's call.  Disappointed with results and earnings calls from TLRA and RUBI - especially given they were off much lower bases.  Silver lining for TLRA was its growth as SSP in CTV - (a few notable recent wins in large Canadian cable networks) tempered by relatively poor cash position.

	                             TTD	TLRA	RUBI    ROKU (Platform only)
Qtrly Rev in recent ER 	             164	16.6	27.6	179
				
YOY Rev Growth %	              38	23	27	79%
% YOY Rev Growth in previous Qtr .  42.4	47	32	86%

% Change in in growth rate	    -9.9%	-51.1%	-15.6%	-8.1%
				
CTV Rev Growth % this Qtr	     145	115		79%
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24

BroadwayDan,

This past weekend I was dragged into the public square and flogged for an innocuous reference to a paid subscription, as it is against this board’s rules.

The stock remains very popular throughout Fooldom.

This could be interpreted by some that several paid services of The Motley Fool have The Trade Desk as a high conviction recommendation.

And it’s no secret the Fool is not about to sell a stock with this many tailwinds anytime soon.

This could be interpreted by some that The Motley Fool has discussed this hold strategy in one or more of their paid services.

I trust this was not your intent when you added this “color” to your commentary. But just trying to keep this board “paid subscription reference free”.

H

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I don’t think BD violated any TMF rules with what he said. If anything, it would spark interest for people to jump into paid subscriptions to learn more.

A violation would be directly referencing a recommendation and calling out which premium services recommended it.

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26

I have grown into the opinion that this board got too infatuated with growth rate % as the end-all be-all.

Instead of weighing a balance of mkt cap, valuation, and growth rate, the stigma appears to be that ZM, CRWD, DDOG, are superior stocks.

The stocks have proven that out yet, although to be fair the latter 3 haven’t existed that long yet.

TTD has had superior market-beating returns each of the past 3 years: 2017, 2018, and 2019.
This is despite large drops from peak highs in each of those 3 years.
Implying each large drop wound up being a buying oppty.

Nothing has changed in their tailwinds, and in fact they keep growing.
It does appear TTD has more election-year cyclical tendencies, so I view 2019 akin to 2017, and expect a re-acceleration in 2020 of top-line growth.

Catalysts:
CTV in general, with disney, hboatt, comcast/peacock, and others
Amazon partnership with Prime Video
Intl growth outpacing US for forseeable future, including China barely having started yet
The legacy desktop (think non-programmatic banner ads) business is masking the rapid growth in mobile, dig audio, ctv, and general programmatic lines everywhere else. This will continue to have less and less impact.
Continued great leadership.

I will put TTD up against ZM for stock price CAGR over next 12-24 months without hesitation.
What was proven this year, to-date, is that multiples aren’t being allowed by the market to expand. A 10 or 15 P/S is already much larger than any growth stock. Expecting a market to keep ZM at a 60 P/S multiple seemed a head-scratcher. ZM, DDOG, and CRWD are the 3 highest P/S ratios in my watchlist, and have returned 16%, 16%, and 4% off their lows YTD.

So I don’t care what the analysts did or didn’t do. I won’t limit my investing criteria to growth rate + GM% while ignoring valuation completely.

glta,
Dreamer

long TTD, ESTC, and AYX. likely adding ZS back soon. About 22% cash at the moment.

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27

Point being, seems to this Saul-fan and Fool, the Saul/TTD relationship was never going to be a life-long venture.

Gee, BD, I’m still holding a position in TTD. Not a big one but about 3.5%. I was just providing info and not drawing conclusions.

Saul

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The stock remains very popular throughout Fooldom.

This could be interpreted by some that several paid services of The Motley Fool have The Trade Desk as a high conviction recommendation.

And it’s no secret the Fool is not about to sell a stock with this many tailwinds anytime soon.

This could be interpreted by some that The Motley Fool has discussed this hold strategy in one or more of their paid services.

I trust this was not your intent when you added this “color” to your commentary. But just trying to keep this board “paid subscription reference free”.

Hi again H,

You persist in misinterpreting the Rules of the Board and the Fool’s rules.

Recommendations are time sensitive and the sensitivity decreases with every day. In general it seems that the Fool doesn’t mind if you’ve mentioned a recommendation that they made a month ago or three months ago, or six months ago, because their members have had plenty of time to act on the recommendation before you said anything. For example, “I got into Shopify when the Fool recommended it two months in a row mid-2017.” I’m not giving anything away. Nothing about what was said in those recommendations is certain to be relevant now. Everything or nothing may have changed.

However, if you post on the afternoon of a noon recommendation, and say, “Hey Rule Breakers just recommended XXXX,” the Fool guys would be very pissed off. Surely you see the difference!

Saul

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Hi Monkey

You mentioned “The thing they said that resonated the most with me is that 20% of TV content is now streaming, while only 3% of TV ads have moved to streaming”

Not all TV ads would flow to streaming. A significant amount would go to other digital advertising outside the scope of TTD (FB, Google, Twitter etc.)

Having said that - I feel confident in the overall TTD story.

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Not all TV ads would flow to streaming. A significant amount would go to other digital advertising outside the scope of TTD (FB, Google, Twitter etc.)

So you are suggesting that all advertising that is on regular TV today will not move to streaming TV if, as Jeff theorizes, all TV becomes streaming in the future? Sure that’s possible. But I think what TTD is suggesting is the opposite of that. Not only will the total advertising spend on digital TV not be less than what it is on regular TV today (as it sounds like you believe), they are anticipating it being much more simply because advertisements will be targeted ads (like they do on the web today), which aren’t possible with traditional TV broadcasting over cable networks.

On the earnings call, Jeff said something about how a high percentage of TV ads today are completely wasted because so many people viewing them aren’t interested in the products being shown. But when it moves to streaming, the same TV break will show different advertisements to different people, making them much more targeted, more valuable, and theoretically more expensive.

Sure, FB, Google, etc will still do plenty of advertising, but it’s entirely possible that the TAM for streaming TV in the future will be higher than the TAM for traditional TV today.

-mekong

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Analysts liked Roku EC and raised their targets.

I have more TTD than Roku and TWLO. But 38% grth is low, much lower than the 47% grth put up by TWLO which most here disliked or the 79% platform grth of ROKU. Also TWLO was suffering from unreasonably high comparisons from last year. Cant say the same for TTD. TWLO sits at a lower valuation that TTD but when adjusted for GM more or less the same IMHO. TWLO and possibly TTD should see higher grth next year with elections being 1 reason. But it is clear that in this profit focus environment TTD is loved more.

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If ATSC 2 ever gets off the ground and replaces conventional broadcast TV, it will also include an internet back channel to allow targeted ads. So in the future, even conventional TV will allow targeted ads.

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Sorry, I think it’s ATSC 3.0 (not 2) that will see the light of day.
Ps is there any way to edit your posts here?

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" Not only will the total advertising spend on digital TV not be less than what it is on regular TV today (as it sounds like you believe) ?"

That is not what I said, Monkey. Sure - the spend on digital TV would continue to grow, and spend on traditional TV continue to decline. What I’m saying is that if company A was allocating $100 in TV spend in years past, in my opinion, they won’t allocate $100 in digital TV spend in future years. They might allocate $80, and put $20 towards Google/FB (making numbers up illustrate my point).

Consumers are used to watching content without ads. Most of the major on demand content platforms are ad free (Netflix, Amazon etc.). Although I very much like Mr. Green (and hence long TTD), I don’t buy his argument about the ad opportunity within TV streaming space.

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“A was allocating $100 in TV spend in years past, in my opinion, they won’t allocate $100 in digital TV spend in future years. They might allocate $80, and put $20 towards Google/FB (making numbers up illustrate my point).”

As a business owner this makes no sense at all. Why would I spend less if I’m shown that I can now get more precise targeted advertising that reaches the eyeballs specific to what my business provides over traditional advertising?

What I hated the most about spending money on advertising in the past is not knowing if the ad dollars we were spending were ever working. It was a very inaccurate science be it television or radio or print. There was really no proven way to track the impact. Always felt like a waste of money to me.

Now if I can as a business owner reach my audience through targeted ads I might spend more on that, certainly not less.

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That is not what I said, Monkey.

Just for the record, it’s me, mekong, that you’ve been quoting from the beginning. Not Monkey, who is another member, although he did also post above in this thread.

Sure - the spend on digital TV would continue to grow, and spend on traditional TV continue to decline. What I’m saying is that if company A was allocating $100 in TV spend in years past, in my opinion, they won’t allocate $100 in digital TV spend in future years. They might allocate $80, and put $20 towards Google/FB (making numbers up illustrate my point).

Yes, understood, that’s exactly what I thought you were saying. I am arguing the opposite. That a lot of money that is spent today on FB and Google (because they have the ability to “target” ads there, which is not currently possible on TV) will move from FB/Google, to streaming TV, because advertisers will be able to use targeted ads on streaming TV in the future. So not only could all of the money that advertisers spend on traditional TV today move to streaming TV but even more money from Google/FB today could also move to streaming TV. Just theoretical numbers, an advertiser that spends $100 today on targeted online (FB/Google) ads and $20 on TV, might in the future spend $60 on targeted online (FB/Google) ads and $60 on targeted streaming TV ads.

From what I understand TV streaming services, such as Hulu, make much more money, per user, from free users (who do not pay a monthly fee but watch ads) than they do from paid subscribers (who pay $4.99, or $9.99, etc per month to watch ad free). Jeff Green has claimed for a while that it won’t be long before Netflix will have a free tier (no monthly fee) with ads, because there is a lot more money to be made from those users than from the ones that pay a monthly fee to be ad-free. And TTD plans to be ready to monetize many of those ads.

In the end, you may very well turn out to be right, firefreedom. I might ultimately be wrong. We’re both long TTD so we are both hoping for good things from them in the future. I’m just pointing out why Jeff Green/TTD (and I) are even more optimistic about where those ad dollars will end up once TV is primarily streaming, which if we’re right, would be even better for us as TTD shareholders.

There is a long way to go and a lot that will play out over the next few years. Jeff makes a lot of good arguments about where the advertising world is headed and I have a lot of faith in what he is saying, so that’s why TTD is one of my three largest investments.

-mekong

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Mekong,

Certainly, some may transition from the walled gardens to CTV. However, there is an enormous budget devoted to linear, traditional TV. It is more likely budgets will be shifted from there to CTV versus the walls. Linear is a spray and pray model excepting trying to pigeonhole people. If you watch football, you must then like “x”.

The walled gardens are better than linear TV in terms of targeting but aren’t as transparent as open internet sources.

But I agree, when companies like Proctor & Gamble start to realize the efficacy of programmatic done right, the shift will happen. And there is evidence that P&G already dislikes the walled gardens, but they have too many eyeballs to ignore totally.

In either instance, it’s good for TTD so I’m splitting hairs.

AJ

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That is not what I said, Monkey. Sure - the spend on digital TV would continue to grow, and spend on traditional TV continue to decline. What I’m saying is that if company A was allocating $100 in TV spend in years past, in my opinion, they won’t allocate $100 in digital TV spend in future years. They might allocate $80, and put $20 towards Google/FB (making numbers up illustrate my point).

Say that’s true. Do you realize how much more (in the aggregate) that will be spent on OTT than is currently. Under current spend of that $100, only about $3 is spent in OTT. So to go to $80 would be…

The enormity of the TTD or ROKU opportunity. And I think $80 is way way too rosey. Only $15 or $20 would be incredible.

Darth

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39

Analysts liked Roku EC and raised their targets.

I have more TTD than Roku and TWLO. But 38% grth is low, much lower than the 47% grth put up by TWLO which most here disliked or the 79% platform grth of ROKU. Also TWLO was suffering from unreasonably high comparisons from last year. Cant say the same for TTD. TWLO sits at a lower valuation that TTD but when adjusted for GM more or less the same IMHO. TWLO and possibly TTD should see higher grth next year with elections being 1 reason. But it is clear that in this profit focus environment TTD is loved more.

In a SaaS business, unprofitability at an early stage is not much of a concern. There is Customer Aquisition Cost and Lifetime Value. Take MDB for example. Once a customer signs up for the SaaS offering, the customer generates money for MDB far into the future, without much further cost from MDB to continue selling to them.

I don’t think we can think this way about companies in the ad space. Roku will always need to be convincing advertisers that its platform is the best place to place ads RIGHT NOW. I am not concerned about MDB’s lack of profitability, but it does concern me that Roku and Pinterest are unprofitable. Look at other successful ad sellers - Google and Facebook. They did not have to scale into profitability. Their ad businesses were profitable from early days. In short, I’m a bit more skeptical about Roku’s path to profitability than I am for a company like MDB, even though at this point in time MDB still has heavy operating losses and Roku is almost at breakeven.

The TTD’s operating profits are very important to me as an investor. In fact, Jeff Green has consistently said that this is his company’s key advantage having taken the DSP route and not the SSP route.

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It would seem that most people would prefer mo ads when watching TV. But the programming costs money somebody has to pay for it, and some of those watching will not be able to afford platforms without the ads.

Make an assumption that targeted ads get more response than non targeted ones. I don’t have a pet, so dog food ads are wasted on me. So are any for beauty products. Even the ubiquitous ICE car ads are wasted since I will buy only electric cars in the future. In fact with present cable TV, over 90% of the ads shot my way are wasted. As are mobile ads, I am an older generation and only use my iphone when on the move and not looking to buy something.

I agree that OTT TV will grow rapidly. Wish I could find something in addition to ROKU and TTD to buy into to that trend .

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