The economy overall may be down in the dumps, but many companies are doing just fine. Two that have weathered the storm better than expected are The Trade Desk (TTD 2.42%) and Applied Materials (AMAT 1.35%). Both handed shareholders surprisingly positive second-quarter 2020 updates and rosy outlooks for the summer months, and their respective stocks are pushing to new all-time highs. 

Digital ads are down but coming back with a vengeance

After an epic run the last few years, cloud-based digital ad purchasing platform The Trade Desk reported a 13% year-over-year decline in revenue to $139 million in Q2 2020. It might come as a surprise then that shares are still hovering near all-time highs and holding onto a more than 80% increase year to date.

As with all growth companies, future potential is of far more importance than the past. And though The Trade Desk's revenue was expected to take a hit during the spring as many companies briefly paused their marketing campaigns to reassess the situation, the digital ad industry is overall getting a huge shot in the arm this year.

After all, global ad spend is on track to hit the $1 trillion a year mark within the next decade, and digital ads only accounted for half of the budget last year. But while traditional ad efforts are waning, digital is taking over. That was made evident by The Trade Desk's outlook for Q3, calling for an increase in revenue of 9% at the midpoint of guidance.

Clearly 2020 is going to be a blip in The Trade Desk's growth story, but the growth story is nevertheless far from over. Single-digit percentage revenue increases don't justify an 80% advance in share price, but the prospect of future bottom-line return might. Even during a tough period, this ad-tech company was still handily in profitable territory, reporting adjusted net income of $44.8 million -- good for an adjusted profit margin of 32%. And with cash and short-term investments of $555 million and debt of just $142 million, The Trade Desk has the firepower needed to continue expanding its highly profitable business model.  

Granted, after the big run-up this year, I'm personally not adding to my existing position in this stock at the moment. Shares are trading for over 33 times trailing 12-month sales and 112 times trailing 12-month adjusted net income. But such a high-flying valuation isn't totally surprising given The Trade Desk's massive and still-growing market, its own history of scooping up market share, and the potential for big bottom-line returns. I have no plans to sell this one.

A worker in a lab suit, gloves, and a mask holding a semiconductor chip

Image source: Getty Images.

The semiconductor "slump" is over

The last few years have been wild for the semiconductor industry. As with all things manufacturing, sales go through cycles that are sensitive to supply and demand. The cycle started to enter a downtrend during the second half of 2018, and a heated U.S.-China trade war hastened the waning in demand in 2019. But headed into 2020, things were on the mend again -- until coronavirus took the world by storm. But chip manufacturing equipment supplier Applied Materials just showed that not even a pandemic can hold down technology hardware when it's time for it to boom.

Applied's revenue grew 23% to just shy of $4.40 billion during its fiscal 2020 third quarter (the three months from May to July). On the news that management expects this momentum to continue -- fiscal Q4 revenue is expected to increase 23% year over year at the midpoint -- shares of the equipment and manufacturing process developer are close to all-time highs and are up 9% year to date. New chip technology is creating the tailwind here, with many of Applied's manufacturing customers in need of updating their processes for the next hardware upgrade cycle driven by digital memory, connectivity, and display technology.

Even better than the revenue rebound were Applied's profitability; net income increased 47% to $841 million -- good for a 19% net margin -- and adjusted earnings per share are expected to make another 46% jump at the midpoint during the final quarter of fiscal 2020. The good times are clearly rolling in the semiconductor world, and the economic uncertainty the coronavirus has brought on is forcing many organizations to make some much-needed operational upgrades. With an efficient operating model itself, Applied is able to grow its net income at an even faster rate than its overall sales. 

How long the current uptrend will last for the chip industry is anyone's guess, and at some point the surging demand will ease. But for the time being, it pays to scoop up some shares of cyclical stocks like Applied Materials on the way up. Even near all-time highs, the stock trades for 19.3 times trailing 12-month earnings. Given the enduring long-term growth and increasing importance of semiconductors, shares of Applied are a great way to get broad exposure to the industry right now.