The Trade Desk (TTD) Stock Analysis: Key Factors Influencing Its Future Performance

The Trade Desk (TTD) has recently captured the attention of Zacks.com visitors, and it's worth examining the factors that could influence its near-term performance.

Shares of this digital-advertising platform operator have declined by 6.8% over the past month, compared to the S&P 500 composite's 3.9% increase. The Zacks Internet - Services industry, which The Trade Desk belongs to, has also lost 1.5% during this period. The question now is: Where could the stock be headed in the near future?

While media reports and rumors often cause stock prices to fluctuate, it's ultimately the fundamental factors that drive long-term investment decisions.

Earnings Estimate Revisions

At Zacks, we prioritize evaluating changes in a company's earnings projections. This is because we believe that a stock's fair value is determined by the present value of its future earnings stream. Our analysis is based on how sell-side analysts are revising their earnings estimates to account for the latest business trends. When earnings estimates for a company increase, its stock's fair value also increases. When a stock's fair value is higher than its current market price, investors tend to buy, leading to an upward price movement. Studies have shown a strong correlation between trends in earnings estimate revisions and short-term stock price movements.

For the current quarter, The Trade Desk is expected to report earnings of $0.42 per share, indicating a 7.7% increase from the year-ago quarter. The Zacks Consensus Estimate has remained unchanged over the last 30 days.

The consensus earnings estimate for the current fiscal year is $1.77, indicating a 6.6% year-over-year change. This estimate has also remained unchanged over the last 30 days.

For the next fiscal year, the consensus earnings estimate of $2.17 indicates a 22.4% change from what The Trade Desk is expected to report a year ago. This estimate has also remained unchanged over the past month.

Projected Revenue Growth

While earnings growth is a key indicator of a company's financial health, it's important to consider a company's potential revenue growth as well. In the case of The Trade Desk, the consensus sales estimate for the current quarter is $684.33 million, indicating a 17.1% year-over-year change. The estimates for the current and next fiscal years are $2.85 billion and $3.39 billion, indicating changes of 16.6% and 19%, respectively.

Last Reported Results and Surprise History

The Trade Desk reported revenues of $616.02 million in the last reported quarter, representing a 25.4% year-over-year change. EPS for the same period was $0.33, compared to $0.26 a year ago.

Compared to the Zacks Consensus Estimate of $574.27 million, the reported revenues represent a 7.27% surprise. The EPS surprise was 32%.

The company beat consensus EPS estimates in each of the trailing four quarters and topped consensus revenue estimates three times over this period.

Valuation

No investment decision can be efficient without considering a stock's valuation. Whether a stock's current price reflects the intrinsic value of the underlying business and the company's growth prospects is crucial for its future price performance. Comparing a company's valuation multiples, such as its P/E, P/S, and P/CF ratios, to its own historical values can help determine whether its stock is fairly valued, overvalued, or undervalued. Comparing the company relative to its peers on these parameters gives a good sense of how reasonable its stock price is.

The Trade Desk is graded F on this front, indicating that it is trading at a premium to its peers. Click here to see the values of some of the valuation metrics that have driven this grade.

Bottom Line

The facts discussed here and other information on Zacks.com can help determine whether or not it's worthwhile paying attention to market buzz about The Trade Desk. However, its Zacks Rank #3 suggests that it may perform in line with the broader market in the near term.

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