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3 Ways The Trade Desk Impressed Investors in 2020

By Daniel Sparks - Jan 7, 2021 at 10:03AM

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Shares of the ad-tech specialist soared in 2020 as the company gained market share during a pandemic.

For The Trade Desk ( TTD -7.93% ), 2020 has marked a significant deceleration in the company's revenue growth rate. For the three periods The Trade Desk has reported 2020 financial results, total revenue is up 16% year over year, down from 40% growth in the same period in 2019. Yet the growth stock is up 180% over the last 12 months. What gives?

Despite what seems like a tough year for the ad tech company on the surface, The Trade Desk gave investors some clear reasons to be optimistic. Not only did its business rebound nicely from a downturn earlier this year but the company has been importantly gaining market share from competitors.

A person looking at charts on a laptop

Image source: The Trade Desk.

1. 32% revenue growth in Q3

One of the facets of The Trade Desk's data-driven digital advertising platform that makes it compelling to markets is the agility with which clients can put marketing dollars to work. The Trade Desk's platform gives marketers not just data, campaign measurement, and advanced targeting abilities but total flexibility in marketing budgets. Though this is a major strength of The Trade Desk's platform, it temporarily worked against the company earlier this year when many marketers paused or significantly reduced their ad spend during government-mandated lockdowns. The Trade Desk's second-quarter revenue fell 13% year over year.

But this setback was short-lived. Q3 revenue jumped 32% year over year. With Alphabet and Facebook's advertising revenue increasing just 10% and 22% during the same period, The Trade Desk seems to be gaining market share relative to these much larger advertising giants.

2. A huge bottom-line improvement

Another bullish point The Trade Desk investors were likely impressed with in 2020 was the company's massive bottom-line improvement. Consider that The Trade Desk's net income for the trailing-9-month period ending Sep. 30 was $90 million. This was up from $57 million in the same period in 2019. This was fueled by 16% revenue growth over this time frame and a widening net profit margin. Between these two periods, The Trade Desk's net profit margin widened from 13% to 18%.

3. A return to triple-digit growth in CTV ad spend

Finally, investors should note the resilience of ad spend in The Trade Desk's connected TV (CTV) ad channel. Even during Q2, when advertiser budgets suffered and some marketers even paused their spend, CTV ad spend on The Trade Desk's platform still grew 40% year over year.

Even more, notable, it didn't take long for this growth catalyst to recover. The Trade Desk's CTV ad spend grew at a rate greater than 100% year over year in Q3 2020.

As the economy reopens and as advertisers ramp up their spending, The Trade Desk's strength in 2020 despite a difficult macroenvironment bodes well for the tech company's potential in 2021 and beyond.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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The Trade Desk Stock Quote
The Trade Desk
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$95.22 (-7.93%) $-8.20

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