A new year is a great time to reevaluate finances across the board. It may be a time when one adds money to specific accounts to reduce tax burdens.
It is also an excellent opportunity to review stocks to decide whether to keep some stocks, add to current positions, or start new ones. To that end, I am eyeing one stock for adding shares and another for a new position. For this reason, I'm considering more shares in The Trade Desk (TTD 6.35%) and an addition to my cybersecurity stake with a position in CrowdStrike (CRWD +2.76%).
1. The Trade Desk
The Trade Desk is a demand-side advertising platform that allows advertisers and agencies to manage online ad campaigns. Within The Trade Desk's ecosystem, publishers and consumers participate in the process. This helps advertisers to target a desired audience more precisely and evaluate the performance of a specific ad.
Additionally, the company can incorporate technological advances within the platform. That improves on its considerable and growing database, creating a virtuous cycle that makes it more valuable for all parties involved.
Furthermore, its addressable market continues to grow. BCC Research estimated the compound annual growth rate of the digital ad industry at 12% through 2027, reaching $1.2 trillion that year.
The Trade Desk has scarcely begun to address that market. In the first nine months of 2023, it reported $1.3 billion in revenue, rising 23% versus the same period in 2022.
Admittedly, nearly half of its income during that time frame came from interest income and short-term investments. Still, that led to $82 million in net income in the first three quarters of 2023, up from the $18 million loss in the same year-ago period.
As the ad market has shown signs of recovery, the stock is up by approximately 50% over the last 12 months.
NASDAQ: TTD
Key Data Points
Also, valuations may not be as high as they appear. As a newly profitable company, its forward price-to-earnings ratio of 57 arguably seems reasonable. Also, its 20 price-to-sales ratio is in line with historical levels before and after the pandemic. As its growth continues, such valuations should bode well for investors wanting to add shares.
2. CrowdStrike
CrowdStrike would technically be a new name for me as I have not yet bought shares. Nonetheless, I'm a longtime shareholder of Zscaler, and buying CrowdStrike is the way that I would like to increase and diversify my cybersecurity holdings.
CrowdStrike has stood out by using crowdsourced data to identify potential threats (hence, the company's name). It also specializes in endpoint security, securing laptops, smartphones, servers, and other devices that could be located anywhere.
CrowdStrike has also successfully persuaded its customers to turn to them for more security needs. Around 63% of customers subscribe to at least five modules. Moreover, deals involving eight or more modules rose 78% over the last year.
Given this rising popularity, it should surprise few that in the first nine months of fiscal 2024 (ended Oct. 31), the company generated more than $2.2 billion in revenue, a 38% increase versus the same period one year ago.
Also, CrowdStrike earned $36 million in the year's first three quarters. Admittedly, it ran an operating loss, though operating profits turned positive in the third quarter. Still, $107 million in interest income over the nine-month period made its profit possible.
NASDAQ: CRWD
Key Data Points
The rising optimism also helped the stock rise by close to 120% over the last year. Still, at more than 21 times sales and 84 times forward earnings, it has become expensive, though the rapid revenue growth should put downward pressure on its multiple. That factor could keep CrowdStrike growing as more customers turn to its cybersecurity platform.
