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What to Watch When The Trade Desk Reports Earnings Today

By Daniel Sparks – May 7, 2020 at 7:31AM

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The data-driven ad-buying specialist's soaring stock price will be tested.

Growth stocks have been on fire recently. Programmatic advertising specialist The Trade Desk (TTD -4.26%) has been no exception. Shares have doubled since March lows seen amid the coronavirus stock market sell-off. Further, zooming out over the past 12 months, the stock is up 35%, crushing the S&P 500's 2.5% decline over this same time period.

After market close on Thursday, when the company is scheduled to report its first-quarter results, the stock's sharp climb higher in recent weeks will be tested. Investors will look to see if the tech company's top line has been able to continue growing rapidly. Further, investors will be looking for an update on how The Trade Desk is managing the impact of the coronavirus. Some have feared that digital advertising could take a hit amid economic weakness caused by travel restrictions, stay-at-home orders, and store closures.

Going into The Trade Desk's earnings report, here are several key items to check on.

A person looking at charts on a laptop

Image source: Getty Images.

1. Revenue growth

When The Trade Desk reported its fourth quarter, management said it expected its first-quarter revenue to come in at $169 million. This would have implied an impressive 40% year over year growth rate -- an acceleration from 35% revenue growth in the fourth quarter of 2019.

But this forecast was provided before the coronavirus became a global pandemic and subsequently hit the United States economy hard. Because of COVID-19's impact on the U.S., analysts have modeled for revenue to increase only 31% year over year during the period. This translates to a consensus estimate for a top line of $158.3 million.

2. Growth in connected TV ad spend

Investors will also pay close attention to The Trade Desk's reported year-over-year growth rate for connected TV ad spend on its platform. Not only has this channel been growing rapidly in previous quarters, but Trade Desk CEO Jeff Green regularly discusses how he expects connected TV to be a powerful catalyst in 2020 and beyond.

In the fourth quarter of 2019, connected TV ad spend increased 100% year over year. Given how high this growth rate is, some deceleration would be natural, particularly given a likely contraction in ad spend toward the end of the quarter, when COVID-19 sent the economy reeling.

3. Guidance

Arguably equally important to The Trade Desk's first-quarter results will be management's guidance for Q2. The coronavirus pandemic has had more time to negatively affect retailers and marketers during the current quarter than in Q1, likely translating to a deceleration in The Trade Desk's revenue growth during the period as many advertisers pull back their spending.

Unsurprisingly, analysts are expecting The Trade Desk to guide for much slower growth during the period. Specifically, the average analyst estimate calls for the tech company's revenue to rise 12.9% year over year to $175.7 million in Q2.

The Trade Desk will report its earnings after market close on Thursday, May 7. Management will host a live conference call to discuss the ad-tech company's first-quarter results at 2 p.m. PDT on the same day.

Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends The Trade Desk. The Motley Fool has a disclosure policy.

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