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How The Trade Desk's Stock Tripled in 2020

By Anders Bylund - Jan 8, 2021 at 10:11AM

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The ad-buying marketplace operator tapped into the booming video-streaming sector last year.

What happened

Shares of The Trade Desk ( TTD 6.79% ) rose 208.3% last year, according to data from S&P Global Market Intelligence. The company, which operates a platform connecting digital media outlets with advertisers, benefited from explosive consumer interest in connected TV devices and services, where The Trade Desk is a leading seller of ad space.

So what

The path to massive growth wasn't clear in the early going. The Trade Desk's revenue sputtered in August's second-quarter report, falling 13% year over year to trigger a 10% sell-off in the span of three market days. But the surging media market soon made it obvious that The Trade Desk has found a valuable ad-selling niche, and share prices started to climb again in September.

November's third-quarter report put the whole debate to rest with positive surprises across the board, including revenue 20% above Wall Street's consensus estimates and triple the expected earnings. The Trade Desk closed 26% higher the next day.

A wide-eyed young couple gasping at their TV screen while devouring popcorn by the fistful.

Image source: Getty Images.

Now what

The smooth sailing ended on Dec. 28. The shares fell 10.6% that day as investors in many high-flying growth stocks decided to cash in some of their profits right before the end of the tax year. The stock has continued to fall from there, stepping down by a couple of percentage points four times over the last two weeks.

That's just an ordinary bout of growth-stock volatility and year-end market mechanics and nothing to panic over. The Trade Desk's business hasn't changed even though the stock now trades nearly 22% below December's all-time highs. That's a buying opportunity in my eyes.

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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Stocks Mentioned

The Trade Desk Stock Quote
The Trade Desk
TTD
$95.72 (6.79%) $6.09

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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