A Bull Market Is Coming: Buying This Great Growth Stock Right Now Could Be a Genius Move
That the stock market has shown remarkable resilience so far this year, despite the odds of a recession and the recent banking turmoil in the US, is evident from this. S&P 500 4% gain of the index in 2023.
Meanwhile, tech-heavy Nasdaq-100 Technology Sector The index has registered a strong gain of 19%, thanks to a rally in tech stocks. It’s worth noting that the S&P 500 has a history of coming back strongly after bear markets. The index has given an average return of 38% in the 12 months since bottoming out during the bear market. The Nasdaq-100 also tends to post big gains in the year following a bear market, suggesting that a bull market may be in the cards as the Federal Reserve eventually pivots and begins cutting interest rates.
That’s why investors can consider buying shares trade desk (TTD 0.43%). The stock has jumped 32% so far in 2023, and it could deliver more upside thanks to the attractive market the company operates in and the impressive growth rates it’s delivering. Let’s take a look at the reasons why buying The Trade Desk could be a great move.
The Trade Desk Is Outperforming the Advertising Industry
Ad technology provider Trade Desk had a solid 2022, with revenue rising 32% to $1.58 billion. Worth noting is that The Trade Desk’s impressive revenue jump comes at a time when the broader digital advertising market has lost steam, posting just 8.6% growth last year after a massive 29.5% jump in 2021.
However, The Trade Desk’s clients significantly increased their spending on the company’s platform last year, despite a significant decline in the digital advertising market. This allowed the company to grow at a much faster rate than in the advertising industry. It’s not surprising to see why advertisers are shifting their budgets towards The Trade Desk.
CEO Jeff Green commented in the company’s February earnings press release that “the world’s leading advertisers are increasingly attracted to channels such as Connected TV (CTV) and retail media, which deliver premium value at scale. “
Simply put, the adoption of streaming applications allows advertisers to improve audience targeting and get higher returns on their advertising spend. The Trade Desk claims that it has the widest reach in this market, with access to over 90 million homes and over 120 million connected television (TV) devices.
Insider Intelligence estimates that spending on retail media channels such as CTV is expected to grow from $32 billion last year to $67 billion in 2026 in the US alone. This tremendous growth will be driven by advertisers shifting their advertising dollars to on-demand video providers. Another estimate from the Interactive Advertising Bureau (IAB) suggests that ad investment in CTV could grow by 14.4% this year, while traditional linear TV will see a decline of 6.3%.
Furthermore, The Trade Desk has a solid opportunity to grow its business in the long run as it received 90% of advertising spend on its platform from North America last year. Only 10% of gross spend on the company’s platform in 2022 came from global markets. But it’s worth noting that last year 67% of all advertising dollars in the global market were spent in North America versus 33%.
This explains why The Trade Desk is busy expanding its footprint in international markets. The company has partnered with leading retailers such as tesco Fairprice in Europe and Singapore. As a result, it won’t be surprising to see The Trade Desk’s revenue top out in the coming years, and analysts expect the same from the company.
This impressive top-line growth is expected to underpin the company’s earnings as well, with consensus estimates calling for 24% annual earnings growth over the next five years on The Trade Desk.
The stock is expected to go higher
The healthy growth potential of The Trade Desk explains why analysts are expecting a healthy rally from the stock. It carries an average 12-month price target of $75 based on the consensus of 21 analysts, which would imply 26% upside from current levels. Street-high price target of $90 mark on potential upside of 52%.
The company’s largely addressable market in the programmatic advertising space is expected to reach $725 billion globally by 2026, compared to $493 billion last year. The Trade Desk is already riding this secular growth opportunity, as shown by increased ad spend on its platform. As such, it wouldn’t be surprising to see The Trade Desk stock head significantly higher in the future.
But the stock’s forward price-to-earnings ratio of 56 means that investors would have to pay a rich valuation to buy The Trade Desk. However, growth investors might consider paying that much for The Trade Desk now because its growing influence in the advertising space suggests it can maintain a high pace of growth for years to come and justify rich valuations. Could
Harsh Chauhan does not have any position in any of the mentioned stocks. The Motley Fool has posts at The Trade Desk and recommends it. The Motley Fool recommends Tesco Plc. The Motley Fool has a disclosure policy.