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What to Look for When The Trade Desk Reports Earnings on Thursday

By Parkev Tatevosian, CFA – Aug 3, 2020 at 7:43AM

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To what extent did the company benefit from advertisers ramping up spending?

The coronavirus pandemic is causing significant disruptions to many businesses around the world. The Trade Desk (TTD 4.97%) is one of those impacted by the outbreak as marketing budgets were slashed when cities and states started issuing stay-at-home mandates. The company helps buyers of advertising through its cloud-based platform, where ad buyers can create and optimize data-driven digital ad campaigns. 

Now that phased reopenings are in process, advertisers have restarted their marketing campaigns, and The Trade Desk is poised to benefit. The company is expecting to release its fiscal second-quarter results on Thursday, Aug. 6, and here are a few crucial factors investors should keep an eye on.

Dozens of images sprawled across the sky.

The Trade Desk is ready to help businesses get the word out. Image source: Getty Images.

Will marketing budgets slashed by shutdowns come back this quarter? 

Most importantly, investors should consider the company's revenue growth. In its fiscal first quarter, The Trade Desk increased revenue by 33% from the year prior. In January and February, sales were robust, but then they hit a brick wall when advertisers halted spending following stay-at-home mandates across the U.S. Since marketers have started ramping up advertising to get the word out that they have reopened for business, investors should be looking for revenue to accelerate.

Furthermore, it will be interesting to observe how much of that revenue increase trickled down to the bottom line. The Trade Desk mentioned reducing its spending in its previous quarter. If the company was able to maintain a reduced level of spending while revenue was growing, that could bode well for profits.

Lastly, coming out of the 2008-2009 financial crisis, programmatic advertising surged as marketers shifted their focus. Coming out of (and during) a recession, businesses tend to place their expenses under a microscope; each incremental dollar spent needs more justification. Programmatic advertising, being data-driven, comparable, and measurable, is easier for a chief marketing officer to get approved by a CFO.

It will be interesting to see whether The Trade Desk provides any details on how the industry is changing amid the pandemic. If the current recession leads marketers to shift even more of their allocated budgets toward programmatic ads, The Trade Desk and its shareholders could benefit .   

Getting people back to spending 

The coronavirus pandemic shut down large parts of the U.S. economy, which led marketers to halt advertising momentarily. Some businesses that rely on bringing large groups together, like movie theaters and cruise ships, are facing a long road to recovery. But companies that have been given the green light by governments to reopen need to get the word out to the public.

Enter The Trade Desk, which gives companies an avenue to advertise their businesses on a targeted level. That specificity will be increasingly necessary as the U.S. moves through this phased reopening. For instance, a company may be reopening all its stores in North Carolina but only opening a small portion of their stores in states hardest hit by the coronavirus, like Texas and California.

These high expectations and the uncertainty caused by the pandemic make this earnings report an especially important one. Investors might want to keep an eye out for higher-than-usual price movement in this technology stock after The Trade Desk reports earnings on Aug. 6.

Parkev Tatevosian 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.

Stocks Mentioned

Trade Desk Stock Quote
Trade Desk
TTD
$54.49 (4.97%) $2.58

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