Is the Trade Desk Making Money?
The Trade Desk Inc (NASDQ: TTD) is attracting attention with sky-high stock prices.
For instance, Mr. Market paid $746.37 a share for Trade Desk (TTD) on 28 April 2021. That price rose from $263.17 on 27 April 2020. So what is the Trade Desk and why does Mr. Market love it?
The Trade Desk (TTD) is a digital media-buying platform which operates a marketplace for digital advertising. Trade Desk claims to partner with over 225 media companies.
Trade Desk’s partners include some of the largest media companies on Earth. Those partners include Disney (DIS), Hulu, The Wall Street Journal, Spotify (SPOT), TikTok, BBC.com, Major League Baseball, ViacomCBS (VIAC), Fox Corp (FOXA), Baidu (BIDU), Visa (V),Foursquare, Oracle (ORC), iHeart Media, Expedia (EXPE), Vox, Vice Media, Turner; part of AT&T (ATT), media.net, and SoundCloud.
What is Trade Desk (TTD)?
The Trade Desk (NASDAQ: TTD) is media-buying platform they built for the open internet.
Interestingly, Trade Desk operates two digital advertising platforms. Advertisers will use the Demand Side Platform to plan, execute, and measure the impact of digital advertising campaigns. Media companies will use the Data Management Platform to collect, manage, activate, use, and monetize all of their data in one place.
Media companies can use the Data Management Platform for Data quality and scoring, audience creation, and lookalike modeling. In addition, companies can sell data through a data marketplace.
Trade Desk is a Big Data Company
Thus, Trade Desk (TTD) is a Big Data company that is trying to monetize advertising data.
To that end, Trade Desk operates a Data Alliance that offers media companies access to over 100,000 third-party data segments. Trade Desk’s hopes to make money by those data segments.
Hence, Trade Desk wants to help advertisers and media providers tap the Oil of the 21st Century: data. Many people including Siemens CEO Joe Kaeser think entrepreneurs will build 21st Century fortunes with data just as 20th Century tycoons built fortunes with oil.
Additionally, you can view trade desk as an effort by old media companies to remain relevant and make money in the modern world. To elaborate old media companies are afraid of being unable to make money in a media ecosystem owned by Alphabet (GOOGL) and Facebook (FB).
Notably, The Trade Desk has formed an alliance with I consider Facebook’s most dangerous rival, ByteDance’s TikTok. Hence, you can view The Trade Desk has an effort by traditional media companies to cash in on new digital opportunities.
Is the Trade Desk Making Money?
The Trade Desk (TTD) made some money in 2020. The company’s quarterly gross profit grew from $168.68 million on 31 December 2019 to $268.26 million on 31 December 2020.
Similarly, the quarterly income grew from $52.65 million on 31 December 2019 to $106.43 million on 31 December 2020. In comparison, the Trade Desk’s quarterly revenues rose from $215.94 million on 31 December 2019 to $319.90 million on 31 December 2020.
Impressively, Stockrow estimates the Trade Desk’s revenues grew by 48.14% in the quarter ending on 31 December 2020. The revenues grew by 31.01% in the quarter ending on 30 September 2020.
How Much Cash does the Trade Desk generate?
The Trade Desk’s quarterly operating cash flow grew from -$26.19 million on 31 December 2019 to $174.31 million on 31 December 2020.
Conversely, the quarterly ending cash went from -$42.57 million on 31 December 2019 to $2.98 million on 31 December 2020. However, the quarterly ending cash flow can be higher. For instance, the quarterly ending cash flow rose to $325.21 million on 31 March 2020.
Unfortunately, that quarterly ending cash flow was high because of a large quarterly financing cash flow. The Trade Desk (TTD) reported a quarterly financing cash flow $154.73 million on 31 March 2020. That means, the company borrowed money.
Appealingly, The Trade Desk is paying that debt off. The Trade Desk reported a quarterly financing cash flow of -$88.82 million on 31 December 2020. The quarterly financing flow is the amount of debt the company pays.
So the Trade Desk pays its debts. The Trade Desk reported a Total Debt of $190 million on 31 December 2019 that grew to $293 million on 31 December 2020.
What Value Does the Trade Desk have?
I think Mr. Market grossly overvalues The Trade Desk (NASDAQ: TTD) because it had $2.31 billion in Total Assets on 31 December 2020. I do not think a company with $2.31 million in assets is worth $746.37 a share.
However, Trade Desk gained value in 2020. The Total Assets were $1.449 billion on 31 December 2019.
So what are Trade Desk investors buying? I think the appeal at the Trade Desk is the enormous digital advertising market. That market is growing fast.
Statisa estimates that worldwide digital advertising spending grew from $283.35 billion in 2018 to $332.84 billion in 2020. Moreover, Statista forecasts global digital advertising spending will grow to $389.29 million in 2021, $441.2 million in 2022, $485.25 million in 2023, and $526.17 million in 2024.
Trade Desk (TTD) buyers bet that the company’s marketplace can capture a large share of that market. More precisely, the TTD shareholders think that market could generate an enormous amount of valuable data., the company can monetize.
Another hope is that the company will make more money by allowing partners to build custom solutions on top of The Trade Desk platform. Brands, media agencies, tech platforms, and publishers can add The Trade Desk’s applied programming interface (API) to their apps and websites. The API allows The Trade Desk to harvest those companies’ data and sell it.
The Trade Desk stock will Collapse
I think The Trade Desk (TTD) will make money because of its corporate partners. However, I consider The Trade Desk an overvalued stock that will collapse.
I think investors need to avoid The Trade Desk because its stock will collapse. Conversely, I think investors need to watch The Trade Desk because it could be the future of advertising. Particularly, if politicians break up the Google and Facebook monopolies.
The Trade Desk is another example of a good data-based company that Mr. Market overvalues. The Trade Desk’s share price proves Mr. Market is insane.