Shares of The Trade Desk (TTD 1.67%), the leading independent demand-side platform (DSP) in the adtech industry, were moving higher this week even though there was little news out on the stock.
Instead, The Trade Desk shares seemed to react to more bullish news out of the digital advertising industry, which shows that ad demand is starting to recover after a sharp pullback in 2022. That bodes well for The Trade Desk's own third-quarter earnings report, due out next week on Nov. 9.
As a result, the stock was up 19% for the week as of 2:25 p.m. ET, according to data from S&P Global Market Intelligence.
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Things are looking up for The Trade Desk
Last week featured results from Snap, Alphabet, and Meta Platforms that showed that digital advertising demand was bouncing back. This week it was Roku's turn.
The leading streaming distribution platform said that revenue in the quarter rose 20% to $912 million and it saw strong growth in streaming hours, up 22% to 26.7 billion. Active accounts were also up 16% to 75.8 million. Even better, the business returned to positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) with $43.4 million, more than a year ahead of schedule.
Roku stock soared on the news as its revenue performance was much better than expected. Additionally, Netflix said it had reached 15 million subscribers to its ad tier just a year after its launch.
Both news items point to growing demand for connected TV ad products, where The Trade Desk has invested significantly.
The Trade Desk also got an analyst upgrade yesterday from New Street from sell to neutral as the research firm said The Trade Desk shares had de-risked after the price pulled back and it predicted a "seasonally strong" holiday season. The stock rose toward the end of the week on signs that the Federal Reserve was done raising rates.
What to expect when The Trade Desk reports earnings
The Trade Desk has weathered the digital advertising downturn better than most of its peers, posting revenue growth of at least 20% in each quarter, and that puts the company in a good position for the recovery.
For the third quarter, analysts are expecting revenue growth of 26.2% to $487.2 million and adjusted earnings per share to improve from $0.26 to $0.29. The Trade Desk also looks to be in a position to capitalize on Alphabet's decision to ban third-party cookies from the Chrome web browser in the second half of next year as The Trade Desk's Unified 2.0 targeting solution has emerged as the leading alternative to cookies.
While The Trade Desk stock is expensive, it has earned that premium, and it could be rewarded again next week if it delivers strong earnings results.
