Is The Trade Desk a buy?

It's time to break down one of the hottest stocks within the market. Here is the breakdown of $TTD, otherwise known as The Trade Desk.

Current Price: $742.19

52/Wk High: $847.50

52/Wk Low: $136.00

Market Cap: $34.8 billion

Dividend: None

Read below for the breakdown!

The Trade Desk is a major software and IT services company offering a platform in which clients can purchase digital advertising campaigns on an array of advertising formats and devices.

Due to COVID-19, the company has seen fluctuations in ad spend but has managed to maintain strong growth and a positive outlook.

In the most recent quarter, The Trade Desk reported stellar omnichannel spend growth. 

Connected TV Spend: Up 100%

Mobile Video Spend: Up 70%

Audio Spend: Up 70% 

(Growth above comparison between Q3 2019 and Q3 2020)

Furthermore, The Trade Desk also reported stellar financial growth beating EPS expectations with an EPS of $1.27 versus the expected EPS consensus of $0.43.

Management also reported a solid increase in revenue with Q3 revenues coming in at $216.1 million, representing 32% year-over-year growth.

On top of great revenue growth, net income also expanded to $41.2 million in Q3, up from $19.4 million in Q3 of 2019.

Finally, Adjusted EBITDA for Q3 was a steller $77.2 million, far exceeding the Q3 2019 level of $47.8 million.

When it comes to guidance, management is bullish and maintained that the pandemics risks are diminishing. Management expects Q4 2020 revenues of $287 million to $291 million along with an adjusted EBITDA at or over $115 million.

The balance sheet reflects the company’s growth as well and is quite positive.

Current Debt: $72 million

Current Liabilities: $1.306 billion

Current Assets: $2.138 billion

Cash & Short Term Inv: $557 million

While both earnings and the balance sheet are both very positive on a fundamental basis, the valuation has gotten a little stretched.

Price to Earnings: 222.2x

Price to Sales: 41.52x

Price to Book: 36.33x

Price to Cash Flow: 155.42x

Taking in the numbers the analysts remain on the bullish side for The Trade Desk. Currently, the mean price target is $731.88/share, representing a -1.10% loss. 

The high price target is $925.00/share, representing a 25% gain, while the low price target is $500.00/share, representing a -32.43% loss.

The big money is also quite bullish on The Trade Desk. Currently, 79.85% of the stock is owned by institutions. Top holders include The Vanguard Group, Baillie Gifford & Co., and Morgan Stanley Investment Management.

Taking a look at the technicals the six-month charts are extended but not too far gone to be dangerous. 

Firstly, according to the six-month charts, the MACD is in a strong upward momentum trend within a range of 47.02 down to 36.5.

Secondly, the six-month charts are also indicating an RSI of 62.96 and CCI of 99.80 which are high but trending to the upside. It is also important to note that $TTD trades roughly 105 points off its highs.

Overall I like The Trade Desk both in the mid and long term given the vaccine confirmation for mid next year, expanding growth, and the size of market space to grow into.

In short, I believe consistent winners that see consistent growth as does The Trade Desk are buys, especially when the stock pulls back a sizable amount off its highs.

Long-term and midterm I believe the stock is safe, but in the short term, I expect it to follow the market and its volatility.

EAT - SLEEP - PROFIT

Disclaimer: This is not direct financial advice, simply an opinion based on independent research.