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2 Reasons the Second Half of 2020 Looks Bright for The Trade Desk

By Daniel Sparks – Aug 21, 2020 at 6:45AM

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With CTV ad spend accelerating and revenue growth returning, things are looking good for the ad-tech specialist.

The coronavirus outbreak and the business shutdowns that ensued wreaked havoc on many industries earlier this year. But some were more negatively impacted than others. One industry that saw a significant setback because of COVID-19 was digital advertising -- programmatic advertising, in particular. The same agility that's been attracting marketers to programmatic advertising and helping it gain market share worked against it in March and early April as brands and ad agencies indiscriminately paused and reduced ad spend across all ad formats.

Powerhouse ad-tech company The Trade Desk (TTD -0.30%), which operates the leading platform for buying ad inventory programmatically, saw a temporary hit to its business in March and April, just like most other digital advertising businesses did. Fortunately, however, business is now looking up for The Trade Desk, with double-digit year-over-year revenue growth rates likely returning during the current quarter.

Here's a look at two reasons for investors to be optimistic about the tech company.

A bartchart with an arrow highlighting a growth trend

Image source: Getty Images.

CTV spend is on pace to grow 80% in Q3

While The Trade Desk's ad spend in connected TV (CTV) decelerated significantly in Q2, it was still up 40% year over year during the period. And it's quickly accelerating. Management guided for CTV ad spend to rise 80% year over year in Q3.

"We believe the COVID pandemic has permanently accelerated the growth of connected television, changing the TV landscape forever," said The Trade Desk CEO Jeff Green during the call.

Revenue growth has returned

A strong CTV business in Q2 wasn't enough to grow The Trade Desk's top line during the quarter. Total second-quarter revenue was down 13% from the year-ago period.

But advertisers and marketers have recalibrated their ad campaigns and are beginning to turn up the dial on programmatic. The Trade Desk CFO Blake Grayson said it had seen a "stabilization trend" in ad spend on its platform since the middle of April. Indeed, management guided for a return to growth in Q3. Specifically, The Trade Desk said it expects third-quarter revenue to grow 8% to 10% on a year-over-year basis.

The tech company is, of course, benefiting from the economy opening back up. But it's also seeing advertisers turning to programmatic for its inherent benefits. Advertisers "are now having to do more with less," explained Green during the call. They're "demanding better measurement transparency and more market objectivity."

Management certainly isn't sitting on its laurels as ad spend is recovering. Grayson said the company has been stepping up its investments in growth opportunities since it had seen a stabilization in its business.

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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