Many investors will be glad to see 2022 in the rearview mirror. Each of the major stock market indexes have fallen into bear market territory, and as of Wednesday afternoon, only the Dow Jones Industrial Average has escaped the bear. The biggest loser by a long shot, however, continues to be the Nasdaq Composite, which is still down more than 35% from its high.
Investors would do well to remember that bear markets -- as difficult as they are to endure -- are not only a natural part of the economic cycle, but have historically provided investors with the opportunity to buy top-notch companies at discounted prices. Also, every previous bear market has eventually ceded ground to a bull market, which usually charges out of the gate, enriching investors that stayed the course.
One bear-market bargain that looks particularly ripe for the picking is adtech leader The Trade Desk (TTD 1.75%). The stock is down roughly 61% from last year's high, but a look under the hood shows investors should be buying this stock like there's no tomorrow.
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Taking the adtech space by storm
The ad industry is in the midst of a paradigm shift, with digital advertising expected to account for more than $0.60 of every marketing dollar in 2022. Automating digital ad-buying in real time has revolutionized the industry and is at the heart of everything The Trade Desk does. CEO Jeff Green pioneered the world's first online advertising exchange and continues to disrupt the otherwise stodgy industry.
The Trade Desk's transparent pricing made customers of the world's largest ad agencies, but its disruptive technology has kept them coming back for more. Its platform boasts cutting-edge technology, with the ability to evaluate more than 9 million ad impressions and quadrillions of permutations every second.
While rivals bemoan the death of cookies and the hardships of consumer privacy measures, The Trade Desk developed Unified ID 2.0, which will provide marketers with the data they need -- without the need for personally identifiable information.
Additionally, the latest generation of its platform lets marketers seamlessly incorporate first-party information, further improving its already impressive data-driven results. This state-of-the-art technology generates industry-leading outcomes.
The results speak for themselves
When you compare The Trade Desk's performance to that of its two largest competitors, the results speak for themselves. In the third quarter, Alphabet's revenue grew by a paltry 6% year over year, while sales at Meta Platforms actually declined 4%. At the same time, The Trade Desk's revenue jumped 31%, showing that the company is stealing market share from others in the industry.
Helping drive this growth is a host of happy customers and industry accolades. The Trade Desk was recognized as a 2022 Customer's Choice for Ad Tech, according to Gartner's Peer Insights rankings. Furthermore, The Trade Desk was named a Leader in Quadrant's 2022 SPARK Matrix for Ad Tech Platforms, ranking highest among customer impact and technology excellence. It was also identified as a leader in the Forrester Research's Wave for business-to-business (B2B) advertising solutions, earning the top score in cross-channel capabilities criterion and among the highest scores in the innovation roadmap criterion.
A large and growing opportunity
Advertising continues its ongoing shift to digital, and The Trade Desk is well positioned to benefit from that secular trend. The company generated revenue of $1.1 billion last year, a drop in the bucket compared to its missive opportunity. The global ad industry is expected to hit $808 billion in 2022, surging to more than $1 trillion by 2026. This helps to illustrate the long runway for growth that remains for The Trade Desk.
All this potential doesn't come cheap, at least in terms of traditional valuation metrics. The Trade Desk currently trades for 11 times next year's sales, when most experts agree a reasonable price-to-sales ratio is between 1 and 2. However, companies with a strong history of growth and bright future prospects are frequently awarded premium valuations -- and The Trade Desk certainly qualifies.
That said, given its history of above-average growth, even in the face of macroeconomic tailwinds, significant opportunity for continued growth, and continually evolving disruptive technology, The Trade Desk should experience a significant rebound when the economy recovers. And when it does, investors will wish they'd bought more of The Trade Desk while the stock was down.
