After reporting a year-over-year decline in second-quarter revenue, analysts expected The Trade Desk (TTD 0.06%) to return to growth in Q3. But were analyst estimates for the tech company too low?
In this segment from Fool Live recorded on Oct. 30, senior technology specialist Daniel Sparks and "The Wrap" host Jason Hall take a close look at why The Trade Desk is well positioned for a strong second half of 2020.
Jason Hall: So I would like Daniel, if you can hit on Trade Desk real quick.
Daniel Sparks: Yeah. I'll try to cover it quickly. I think what we're going to be watching when they report earnings is revenue growth. That is because one of the things about programmatic advertising, so they're on the buy side of the platform. So they have a platform, they help marketers direct their advertising across the rest of the internet that's not in the walled gardens, Facebook, Google, etc. One of the things about programmatic advertising that is appealing to it is the agility with which you can increase or decrease your spending and your targeting all at a moment's notice. So during the pandemic, programmatic advertising was hit particularly hard because it's so easy to just pull back real quick. Some of those advertisers -- Jeff Green, the CEO of The Trade Desk gave us some insight -- some were just recalibrating their campaigns. So it wasn't necessary that everyone just stopped. Some were reducing their spend and some did stop. You can imagine small businesses perhaps where their businesses were just shutdown overnight. But anyway, so in the second quarter, revenue growth was down 13% year over year. But I think that we should take the time to first acknowledge the environment. Advertising spend is basically -- companies are back to the growth rates they were pre-coronavirus pandemic. It doesn't mean for sure we're going to see that from The Trade Desk because really they are the first programmatic advertising company to report here. Just a reminder, before the pandemic, they were growing 33% year over year. Analysts are expecting on average 10% growth this quarter. So I would never play a stock on a particular outperformance, thinking the stock is going to go up or down because so many factors can impact that. But I will say there could be a huge resurgence here because just as easily as it can turn off, it could turn right back on and we might see that play out here. Of course, The Trade Desk has a huge part of its business comes from connected TV, so we all know that that has likely accelerated dramatically.
