Whenever I buy a stock, I first make a list of reasons I think that stock can beat the market. This is my investment thesis, and it allows me to evaluate and tweak my decision-making process over the long term. It also helps me filter out short-term noise and focus on the big picture.

The Trade Desk (TTD -0.64%) is up 740% over the last 3 years. After those tremendous gains, many investors may assume it's too late to buy the stock -- but my investment thesis says otherwise. Here are three reasons The Trade Desk is still a buy.

Rocket ship blasting off of a tablet.

Image source: Getty Images

1. Gaining market share

The Trade Desk's demand-side platform (DSP) helps marketers buy ad space and launch data-driven campaigns across digital channels. The digital ad market is growing rapidly, driven by the proliferation of mobile devices, connected TVs (CTVs), and the internet in general.

In fact, according to eMarketer, worldwide digital ad spend has grown at 18% per year since 2017, reaching $378 billion in 2020. But The Trade Desk has grown even faster over the same period, indicating that it's taking market share from the competition.

Metric

2017

2020

CAGR

Revenue

$308.2 million

$836.0 million

39%

Free Cash Flow

$18.2 million

$325.0 million

161%

Data source: The Trade Desk SEC filings. CAGR = compound annual growth rate.

What's driving this growth? The Trade Desk is content-agnostic. Unlike Alphabet's Google and Facebook, it doesn't own content platforms or sell its own ad inventory. This eliminates the conflict of interest present in rival business models, meaning the company's interests are better aligned with those of its clients.

This approach has made The Trade Desk the third-most-popular DSP, according to Advertiser Perceptions, and the most popular independent (i.e. content-agnostic) DSP. That scale gives the company an edge.

The Trade Desk leans on artificial intelligence to help advertisers automate and optimize ad campaigns. As more clients use its platform, The Trade Desk collects more data, which improves its predictive capabilities and enhances the value for clients. This virtuous cycle gets stronger over time, reinforcing The Trade Desk's advantage.

2. Strong growth strategy

According to eMarketer, the digital ad market will reach $646 billion by 2024, putting The Trade Desk in front of a massive opportunity. To that end, management has identified three key growth drivers: CTV, shopping ads, and international markets.

Starting with CTV, The Trade Desk has forged new partnerships to expand its inventory, and its platform now reaches over 80 million households in the U.S. Moreover, its ability to personalize CTV ads and measure performance -- which is virtually impossible with linear TV -- creates value for both marketers and publishers. This unique advantage should drive growth in the years ahead.

Young adults watching TV together.

Image source: Getty Images

In shopping ads, The Trade Desk recently teamed up with Walmart. The pair will launch a new ad tech platform that integrates unique shopper and sales data, allowing marketers to target ads and measure results. Walmart is the world's largest retailer, and this partnership could help The Trade Desk capture a good chunk of the $200 billion shopping ad market.

Finally, The Trade Desk has a big opportunity overseas. Last year, North American clients accounted for 88% of ad spending on its platform, even though the international market is twice as big. However, The Trade Desk is making progress on this front. During the Q1 earnings call, CEO Jeff Green said: "International spend grew much faster than spend in North America." Investors should look for this trend to continue in the coming quarters.

3. Innovative culture

By late 2023, Alphabet plans to remove cookies from its Chrome browser. On the surface, this is a major problem for the industry. Cookies are the snippets of computer code that allow advertisers to track users and deliver targeted ads.

Of course, Google won't suffer to the same extent as its rivals. Cookies are only necessary when users aren't logged in to a website or service (i.e. when there is no first-party data). But Google has roughly 2 billion Gmail logins, meaning it will still be able to track people and target ads on properties like Google Search and YouTube, both of which are immensely popular.

However, The Trade Desk has turned this setback into an opportunity. According to Jeff Green, cookies only affect data-driven ads on web browsers, but play no role in mobile and CTV ads. Moreover, cookies were never designed for the complexities of digital ads in the first place.

So in response to Google's announcement, The Trade Desk created Unified ID 2.0 (UID2), a platform that replaces and improves upon cookies, allowing advertisers to target ads across web browsers, mobile devices, and CTVs.

Rather than installing bits of code on a user's computer, UID2 uses a single sign-on and encrypted email addresses to collect data and deliver targeted ads. This alternative method eliminates the complexity of cookies for advertisers while giving users greater control over their data and privacy.

On a broader scale, these events spotlight The Trade Desk's innovative culture. Faced with an industry-wide problem, the company found a solution. Moreover, its UID2 platform is actually an upgrade to cookies, and it has already garnered support from major ad tech players like PubMatic, Magnite, and Nielsen.

In other words, investors shouldn't worry about Google's decision to remove cookies from Chrome. This isn't a death sentence for the industry -- it's actually one more reason to invest in The Trade Desk.