TTD Stock- Is the Trade Desk a Buy After the 38%+ Drop?

0:00 You might agree with me when i say that one of the best opportunities in the stock market is finding a compelling growth company at a heavily discounted price the trade desk is this exact type of situation as they actually are a leader in the growing field of digital advertising and the stock is down about 40 from recent highs and as an added bonus ttd stock is actually undergoing a 10 for one stock split and even though this doesn't really fundamentally change anything

0:28 About the company a lot of times a stock split does serve as a catalyst as a lot of new investors see a smaller share price and end up buying into the stock my name is blake and today on nine to five investing i'm going to talk about the opportunity that i see with investing in the trade desk stock and then i'm going to talk about the one main risk that i believe people that are considering putting their hard earned money in ttd stock should really be paying attention to so

0:58 What does the trade desk do to make money at a high level the trade desk offers a self-service cloud-based platform that allows advertisers its customers to basically create optimize and manage digital advertising campaigns that are based heavily on data the basic purpose of the trade desk platform is to be that middle man between the advertiser and a pool of targeted customers that could potentially buy the product or service that that advertiser is advertising for

1:29 Example every time that you watch a show from a free streaming service you're always gonna get some ads these advertisements are almost always going to be targeted because these massive technology companies are constantly collecting data about your interest whether you know it or not and they're using that data to send you the most targeted advertisements possible typically this targeting this tracking is done through third-party cookies that are basically put onto your browser

1:58 On your computer whenever you visit a website but the trade desk is actually using a more refined technology called unified id 2.0 i will talk about this technology in a bit more detail in just a minute but for now it's important for you to know that unified id 2.0 just basically does a better job of delivering the right ads to the right people as the old saying goes if the product or service is free then the customer is probably the product i mean the best examples of this

2:27 Concept are facebook and google they totally collect all the data they can on you and use it to basically sell you product every time that you watch an advertisement on a video that you are streaming uh including this one so thank you by the way there's like this auction that occurs in a fraction of a second between dozens of advertisers where they're all bidding the highest dollar for an impression basically a couple seconds of your time these advertisers all set up advertising

2:55 Campaigns where they are paying a certain amount per usually a thousand impressions based on a targeted keyword the more advertisers that want to basically put their ad up in front of someone interested in a keyword the higher that that keyword is going to cost per impression so with that brief explanation in mind you can get an idea of the general digital advertising process that the trade desk is facilitating through their platform and just to be abundantly clear about an

3:25 Important point here the trade desk is not just putting up advertisements in front of people watching free streaming the trade desk is helping their clients the advertisers basically place their ads on a variety of different digital properties including video and streaming services video on other miscellaneous websites like for example news websites and podcasts digital advertising campaigns through the trades platform include a variety of mediums including

3:53 Computers mobile phones and smart tvs that are connected to the internet for example notable partners that advertisers can buy advertisements on through the trade desk platform include disney the wall street journal espn hulu spotify and dozens of others as you can see from this screenshot that i took off of their website the trade desk services the digital advertising market which is just one niche market and the broader advertising market a very fortunate

4:23 Circumstance for the trade desk is that the digital advertising market specifically has been growing very consistently even in 2020 during the recession and arguably depression caused by the global health crisis that did cause overall advertising spending in the united states to shrink by a lot you saw digital advertising grow by about 12 in the same time frame the trade desk is using their proprietary software that actually implements artificial

4:53 Intelligence to target the interests of audiences across all of these digital properties that advertisers are potentially interested in advertising on the name of the proprietary artificial intelligence software that the trade desk has built over the years is koa and it actually leverages the data from 600 billion queries gathered each and every day this is a staggering amount of data for an artificial intelligence to learn from because this is apparently about

5:21 100 times the volume of global daily search queries the main goal of the koa ai is to help advertisers the customers of the trade desk get the most effective cost effective i should say advertising campaign next we should briefly talk about unified id 2.0 this is the technology that the trade desk is implementing in replacement of those third-party cookies that honestly don't do the best job now this whole unified id 2.0 concept might be a little bit

5:54 Controversial because at the end of the day really the purpose is to gather as much data about you as possible so that the trade desk can help their advertisers send more targeted advertisements and ultimately sell you things i personally get annoyed with this data collection type of stuff but it is a reality of using the internet in 2021. if you choose to use the internet then you can bank on the fact that these behemoth technology companies are collecting as much data as they can about so the goal with unified id 2.0 is to help improve targeted advertising but also consider consumer privacy and transparency more or at least this is what the trade desk says on their website i would have to speculate that they care more about servicing their advertisers than anything else the unified id 2.0

6:46 Aggregates data from a variety of companies from the use of a variety of platforms basically and aggregates it unifies it based on an encrypted email address over time they're going to be able to collect a lot of data from website streaming platforms you name it and they're going to put it all under one encrypted email address for each consumer and this allows the trade desk to leverage all of this data to sell extremely targeted advertising campaigns

7:15 To their customers so the artificial intelligence that the trade desk is building based on an amount of data that is hard to even comprehend and the being a leader in the unified id 2.0 are definitely serving as substantial competitive modes for this company one of the primary things that i look for in a ideal investment is going to be competitive modes if a company has multiple strong competitive modes it is very hard for a new company to come in and start eating their

7:46 Lunch so from that perspective i really like what i see with the trade desk so quickly i want to analyze a couple of trends that i see with that income statement and then i'm going to tell you about the main risk that i see with the trade desk as a long-term investment trade desk has put up some substantial revenue numbers with a total of 836 million dollars of revenue in 2020. the trade desk compound annual growth rate over the last five years sits at 32.7 which is a number that almost any investor would be pretty happy about so if we transition to net income and net profit margin the trade desk gets even more attractive in my opinion in 2020 the trade desk made 242 million dollars in net income but that's not even the best part the trade desk has an ideal situation here from a net profit margin perspective in 2016 they actually had a net profit

8:48 Margin that was negative negative 13 and then it has trended actually all the way from 2016 to 2020 to hit a record high in 2020 of 29 net profit margin so this is a pretty surface level analysis of the trends in the income statement because i want to keep the video a reasonable length but you could definitely say that the trends in the income statement the numbers here are looking fire the main risk for the trade desk in my personal opinion is that they are

9:21 A medium-sized fish in a very large pond if google decided to make their own version of unified id 2.0 and basically block the trade desk from implementing it into their platform then this could be really bad for the trade desk because google has so much influence so much sway over advertisers since they are essentially the biggest player in the advertising industry now on the other hand it does seem like the trade desk has built up a lot of momentum they have a lot of buy-in

9:52 For unified id 2.0 and they're actively collecting a lot of data to build the value there so it's not like google will just instantly be able to eat their lunch i just do see it as a threat i think that if the trade does can continue to build these relationships with advertisers continue to collect these mass amounts of data to really service their advertisers as best as possible then they will continue to build value for shareholders long term anyway 9 to 5 gang that is

10:22 About all that i have for you today i appreciate you watching the video all the way through because as you probably know by now it really helps the channel please don't forget to like or subscribe if you have not already as that also really helps the channel just a heads up june is going to be a light month for me because i do have some personal obligations to attend to some significant life events going on so i won't be able to upload much in the month of june but in july i

10:53 Expect to post more frequently than i ever have before and that is thanks to some very smart developers that i have been able been lucky enough to come into contact with so if you guys happen to see this thank you so much for helping me automate some of the more tedious parts of my video making process if you would like to watch a video about why i believe highline's hyper truck erx will beat the tesla semi then click the video on the left if you want to see a video

11:21 About a company that i believe will benefit very heavily from the biden administration then click the thumbnail on the right