The Bullish and Bearish Case for The Trade Desk (TTD)

The Trade Desk (TTD) is an advertising specialist capitalizing on the shift from traditional television advertising to connected TV (CTV) and streaming platforms. This segment is expected to grow significantly in 2024, along with the broader digital advertising market.

However, you can see on the chart below that the balance of ad dollars spent STILL tilts in favor of linear TV, despite rapid consumer adoption of streaming options.

Last year 88% of US households owned at least one internet-connected "television" viewing device.

Meanwhile, traditional cable subscriber "growth" continues to plummet - 23Q3 recorded the highest decline rate in subscribers in the last decade at -7.3%.

This means TTD has a tremendous macro trend tailwind to ride for some time as consumer viewing options and a $1 trillion global advertising market shift in its favor.

And ride it has.

Last quarter TTD soared on a revenue beat and strong guidance. It stock is trading more than +400% higher than it was during the market's initial covid sell-off (and about ~20% below '21 highs).

The company records 15 million advertising impressions per second and it expects UID2, Kokai and advances in its AI in its platform to accelerate this. Unified ID 2.0 (UID2), developed by The Trade Desk, enhances digital advertising by converting email and phone data into encrypted identifiers, offering a privacy-focused alternative to cookies and improving ad performance across multiple channels, including Connected TV.

It is also establishing key partnerships to improve its offerings -- most recently, with Roku. The partnership will enable The Trade Desk’s clients to use Roku’s extensive data insights to optimize their advertising campaigns. This integration promises more precise targeting and efficiency, helping advertisers reach the right TV streaming audiences.

Long-term we love this name -- for all the reasons previously described. But we are cautious ahead of earnings. TTD has a history of big moves that are often linked to guidance.

Metrics show some near-term slowdown in growth. Web visits are down (-19% YoY) and so are mentions. Cautious guidance after the high bar it set last quarter could send shares lower.

But this company has some of the happiest users in the business (sentiment near 80% positive). We're buyers of dips.