The Trade Desk Is Facing a ‘Cookie Crisis.’ Why TTD Stock Could Run to $1,000 Regardless.

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Big returns await dip buyers of TTD stock

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Q1 2021 hedge fund letters, conferences and more

What Happened to The Trade Desk Stock Price Today?

  • The Trade Desk (NASDAQ:TTD) stock plummeted more than 25% after the programmatic advertising leader reported first quarter numbers that smashed estimates, included an above-consensus guide, and which ostensibly looked great.
  • So why did TTD stock collapse?
  • Because investors were expecting an even bigger beat, on the heels of blockbuster earnings reports from Alphabet (NASDAQ:GOOG), Facebook (NASDAQ:FB), Roku (NASDAQ:ROKU), and more over the prior few weeks.
  • The weaker-than-expected beat despite the surging backdrop made investors think that the big scary “Cookie Crisis” is starting to hamper The Trade Desk’s Growth narrative.
  • Investors rushed for the exits.

Why It Happened

  • The Trade Desk’s numbers were really good.
  • Revenues and earnings both smashed expectations. The second quarter guide came in above consensus expectations, too.
  • Revenue growth was 37% in the quarter. Next quarter, revenue growth is expected to accelerate to 87%, thanks to an easy lap from the pandemic. Still, on a two-year-stack basis, revenues rose 70% in Q1 and are expected to rise 74% in Q2 — so there’s acceleration going on here. Great sign.
  • Meanwhile, margins are improving in a big way. Gross margins expanded 340 basis points. EBITDA margins rose 780 basis points to 32%. EBITDA margins are expected to move even higher next quarter.
  • The core financial trends here remain very healthy.
  • But, on the heels of big growth numbers from all other digital advertising players in April and May, everyone already expected the trends to remain healthy. The problem is that The Trade Desk’s numbers were less stellar than what we saw at some other ad firms.
  • That spooked investors. TTD stock plunged. To understand why, we need to understand the “Cookie Crisis”.
  • The traditional way publishers and marketers have collected consumer data – through third-party “cookies” – is being phased out of the industry due to data privacy and control concerns. Without this consumer data, data-driven advertising does not work. It is an existential crisis for The Trade Desk’s business model.
  • To address this crisis, The Trade Desk has pioneered Unified ID 2.o — an opt-in, 100% transparent and secure way to gather and track online consumer data in a post-cookie world.
  • If UID 2.0 works, The Trade Desk will continue to grow like wildfire. If UID 2.0 is a bust, The Trade Desk’s growth narrative will meaningfully slow.
  • Less-than-stellar Q1 numbers sparked fears that UID 2.0 may not work.

Does It Matter?

  • The huge drop in TTD stock matters, and it doesn’t.
  • It matters because it shows that UID 2.0 is not a guaranteed success. Opt-in rates for data-tracking applications are very low. Without~20% opt-in, UID 2.0 won’t work at a scale big enough to make it a formidable data-driven advertising tool. That’s a big problem for The Trade Desk.
  • It doesn’t matter because UID 2.0 has a very high chance of success. Multiple data points suggest that opt-in rates for UID 2.0 will be high enough to enable scalable data-driven ad solutions, and essentially every publisher and advertising firm on the planet is joining the UID 2.0 coalition.
  • Today’s concerns are way overblown.
  • The Trade Desk will continue to grow like wildfire, long after browser cookies fade from the advertising landscape, because UID 2.0 will become bigger and more ubiquitous than cookies ever were.
  • The future of the internet is open, and The Trade Desk is the technology infrastructure of that future.
  • Near-term sellers will be sorry. Long-term dip buyers will be happy.

TTD Stock Price Forecast

  • After the earnings report, analysts largely didn’t budge, because the fundamentals here remain very solid and the stock remains very undervalued.
  • The consensus price target on Wall Street among 15 analysts is $900. Weed out the bad analysts, and the average price target moves to around $915.
  • In other words, the smart folks running the numbers on TTD stock say it has more than 80% upside potential over the next 12 months.
  • We agree with this sentiment. TTD stock is deeply undervalued here. A run back toward $1,000 is likely once cookie fears fade.

We are rapidly entering a smarter world, wherein advancements in IoT devices, big data analytics, and artificial intelligence are enabling a novel era of automated processes, data-driven decision making, and 24/7 connectivity.

The Trade Desk is but one part of this revolution in the Intelligence Economy, which we regularly cover in our free e-letter, Hypergrowth Investing. To get in on the ground floor, subscribe to Hypergrowth Investing today and get top stock picks in your inbox each day the market is open.

On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.

By uncovering early investments in hypergrowth industries, Luke Lango puts you on the ground-floor of world-changing megatrends. It’s how his Daily 10X Report has averaged up to a ridiculous 100% return across all recommendations since launching last May. Click here to see how he does it.

Article by Luke Lango, Investor Place

About Luke Lango

By uncovering early investments in hypergrowth industries, Luke Lango puts you on the ground-floor of world-changing megatrends.