This leader continues to dominate
Jamie Louko (The Trade Desk): Investors weren’t expecting much from The Trade Desk in Q2 given the challenging macroeconomic environment. With high inflation and a potential recession on the horizon, many businesses could easily cut back on their ad spending. Considering The Trade Desk makes money based on total ad spending from its customers, The Trade Desk was likely going to be impacted by that.
However, that was not the case. Q2 revenue reached $377 million, representing a 35% year-over-year jump. This showed that, while advertisers might be pulling back spending on some platforms, they aren’t doing it on The Trade Desk. Additionally, the company believes it will continue to see robust demand for its services: Q3 revenue is expected to grow 28% year over year to $385 million.
Why is the Trade Desk seeing such healthy demand during this environment? It is the leader in digital advertising, especially outside of walled gardens like Alphabet’s (GOOG 2.50%) (GOOGL 2.65%) Google. In other words, if advertisers are looking to buy ad space on a connected TV platform or other independent platforms, The Trade Desk is the best way to do so. Additionally, The Trade Desk provides a high return on ad spending for its customers, so with ad budgets tightening, businesses are forced to spend where they will see the best payback: The Trade Desk.
Even in an environment where advertising is supposed to struggle, The Trade Desk continued to outpace its rivals and gain market share. Therefore, while shares certainly aren’t cheap at 23 times forward sales, you should consider buying this high-quality business while shares are down 34% from their all-time highs.
