Last quarter, The Trade Desk missed its own outlook for the first time in eight years, sending the stock into freefall.
The programmatic advertiser returned to form, delivering a blockbuster quarter that surpassed Wall Street's most bullish estimates.
The Trade Desk stock is still trading near its cheapest valuation in years.
The past few months have been fraught with uncertainty for investors in The Trade Desk(NASDAQ: TTD). The programmatic advertiser delivered an unbroken track record of beating its own guidance for 32 consecutive quarters as it closed out 2024. Then, to the surprise of Wall Street and Main Street alike, The Trade Desk stumbled, missing analysts' consensus estimates and its own forecast. In the wake of its disappointing quarter, the stock went into freefall and shed more than 60% of its value as fair-weather investors headed for the exits.
It isn't surprising, then, that shareholders were sitting on the edge of their seats when the company released its quarterly financial results after the market close on Thursday. Indeed, those who took a long-term view had their faith rewarded as The Trade Desk returned to form and looked to put its troubles behind it.
Image source: Getty Images.
A stark about-face
The Trade Desk's first-quarter results went a long way in assuring investors that the company's best days are still ahead. Revenue of $616 million grew 25% year over year, accelerating from 22% growth in Q4. The results were reflected in the bottom line, with adjusted earnings per share (EPS) of $0.33, representing an increase of 27%.
To give the numbers some context, analysts' consensus estimates were calling for revenue of $575.3 million and adjusted EPS of $0.25.
Helping drive the results was the increased adoption of The Trade Desk's artificial intelligence (AI)-infused Kokai platform. The new, advanced media buying platform features enhanced decision-making and ad campaign measurement tools. Kokai can access more than 13 million advertising impressions every second, helping distill the complexity of those choices into actionable intelligence within milliseconds. The Trade Desk says the platform helps "advertisers buy the right ad impressions, at the right price, to reach the target audience, at the best time.
The company stumbled in the fourth quarter as it faced logistical issues transitioning existing customers from its legacy Solimar platform to Kokai. The Trade Desk immediately embarked on a reorganization to make the company more nimble, while better positioning it to capture emerging opportunities, including connected TV (CTV), retail media, and audio.
"We're encouraged by the early impact of the strategic upgrades at the company we implemented in Q4, which contributed to our outperformance," said co-founder and CEO Jeff Green. "As we build on this momentum, we're optimistic about our ability to continue to outpace the market and deliver increasing value to marketers who prioritize objective, transparent, and data-driven media buying on the open internet."
The Trade Desk also cited its strong customer retention, which remained above 95% during the quarter, a track record that goes back 11 consecutive years.
What the future holds
Some investors were justifiably concerned after The Trade Desk's precipitous fall from grace, but its rapid recovery bodes well for the future. Furthermore, the tone of management's commentary and its outlook suggest the best is yet to come.
For the second quarter, The Trade Desk is guiding for revenue of at least $682 million, which would represent growth of about 17% year over year. It's worth noting that management has a tendency to issue conservative guidance. Its track record (with that one notable exception) shows the results are typically higher.
The Trade Desk stock is currently selling for 34 times forward earnings. While that's something of a premium, the average multiple over the past three years has been closer to 55, so the stock is trading at a significant discount to its historical price.
Don't expect that bargain to last for long. In the wake of its blockbuster financial report, investors have bid the stock up more than 11% in after-hours trading.
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