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The Trade Desk's Fourth Quarter Highlights Wild Momentum

By Daniel Sparks – Updated Apr 10, 2019 at 12:56PM

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Revenue for the period soared and profits more than doubled.

The Trade Desk (TTD 0.43%) saw impressive momentum during the first three quarters of 2018. And now the company's just-reported fourth-quarter results show that the programmatic digital ad-buying platform was able to keep this up in the final quarter of the year. Not only did the company's fourth-quarter results crush expectations, but they marked an acceleration in The Trade Desk's growth.

It was "a groundbreaking year for The Trade Desk," said CEO Jeff Green in a statement to the media this week. 

A pair of hands on a laptop keyboard, with the screen showing stock charts.

Image source: Getty Images.

Accelerating growth

After the company reported third-quarter year-over-year revenue growth of 50% (down from 54% revenue growth in Q2), it only seemed natural to expect a further deceleration in the uncanny revenue growth rates in Q4. This is why it wasn't surprising when management guided for fourth-quarter revenue of $147 million, implying 43% year-over-year growth.

On average, analysts expected fourth-quarter revenue of about $147.8 million. But those estimates were far too low. Even the analyst with the highest estimate for fourth-quarter revenue -- $150.8 million -- undershot significantly. The Trade Desk reported fourth-quarter revenue of $160.5 million. This was up 56% year over year, marking a meaningful acceleration over the company's third-quarter revenue growth rate.

The Trade Desk also saw a huge jump in profitability. Net income for the period was $39.4 million, up from $16.8 million in the year-ago quarter. On a per-share basis, it earned $0.84, up from $0.38 in the same period last year. Non-GAAP earnings per share soared 102% year over year to $1.09, obliterating analysts' average forecast for non-GAAP earnings per share of $0.80.

Analysts are underestimating The Trade Desk's tailwinds

As I argued last August, analysts seem to be underestimating The Trade Desk, not fully appreciating the company's enormous opportunities. In the third-quarter earnings release, management had said customer spend on mobile ads on its platform grew 65% year over year. In addition, its smaller but faster-growing channels, audio and connected TV, saw spend increase 192% and more than tenfold year over year, respectively. When considering this momentum and the company's recent major refresh of its entire ad-buying platform, the meaningful deceleration analysts' were expecting didn't add up. The tailwinds are just too significant.

Sure enough, these same catalysts helped deliver more strong year-over-year growth in Q4.

  • Mobile spend increased 69%
  • Connected TV soared 525%
  • Audio grew 230%

The strong finish to the year meant The Trade Desk distanced itself even further from competition in the programmatic ad-buying space. Gross spend on the company's platform increased 51% during the year, outpacing an estimated 22% increase in total real-time-bidding programmatic advertising spend globally.

Check out the latest The Trade Desk earnings call transcript.

For the full year of 2019, The Trade Desk guided for revenue of "at least $637 million," representing 33% year-over-year growth. Analysts, of course, had lower expectations; the consensus forecast was for 2019 revenue of $617 million.

Notably, this time last year The Trade Desk guided for full-year 2018 revenue of at least $403 million. But actual revenue for the year was $477.3 million. My guess is that The Trade Desk's actual 2019 revenue will once again easily exceed management's target.

Daniel Sparks owns shares of The Trade Desk. The Motley Fool owns shares of and recommends The Trade Desk. The Motley Fool has a disclosure policy.

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