The Trade Desk Plunges on Snap Earnings… Again (NASDAQ:TTD) – Seeking Alpha | Hot Mobile Press


I held shares in The Trade Desk, Inc. (NASDAQ:TTD) for a year or two, and I advocated owning the company in a previous article. But I was beginning to notice an inner pattern my portfolio It feels like every quarter my shares in The Trade Desk, Roku (ROKU), Pinterest (PINS), PubMatic (PUBM), Unity software (u) and Shopify (SHOP) would all fall more than 5% on the same day, although there is no news for these companies.

The culprit? Snap Inc. (SNAP).

There are many companies that are connected to the digital advertising space in one way or another, and since Snap is the first of these digital advertising companies to report on it, Mr. Market is taking these results as a barometer for the rest of the industry. While many of the digital advertising companies I own are fundamentally different from Snap, they’ve still been dragged down every quarter — none more so than The Trade Desk.

As of this writing, Snap has just delivered another poor quarter, and as usual, shares of The Trade Desk are down ~7% on the news. So, is it time to decide whether these stock price declines are justified or just another example of a knee-jerk market reaction?

Investment thesis: The Trade Desk

The Trade Desk is a leader in a world of advertising that demands greater transparency. This has been severely lacking due to the dominance of walled gardens like Alphabet (GOOG, GOOGL) and Meta Platforms (META). The Trade Desk has emerged as a true ad tech leader, and as digital advertising (and connected TV in particular) continues to take a higher share of global ad spend, I think this company is in a position to grow immensely will benefit.

The core offering is a demand-side programmatic advertising platform that enables ad buyers to get the most from their advertising dollars. This cloud-based, self-service platform allows ad buyers to create, manage and optimize their digital campaigns across a variety of channels and devices, including computers, mobile phones and connected TVs. It generates revenue by charging a platform fee based on a percentage of a client’s total advertising spend, as well as by providing additional data and other services and features.

The Trade Desk’s transparent, independent approach was a breath of fresh air and the company has successfully developed a market-leading product. A look at the 2021 Gartner Magic Quadrant for Ad-Tech shows how this company has become a leader despite intense competition from some very big names.

Gartner Magic Quadrant for Ad Tech


The future also looks extremely bright for The Trade Desk, thanks to secular growth in digital, programmatic advertising combined with new opportunities emerging in areas like connected TV. Recently, we’ve seen companies like Netflix (NFLX) and Disney (DIS) plan to add an ad-supported tier to their streaming services. This will further boost The Trade Desk’s business and help it capture more of the approximately $750 billion global advertising market that the company highlighted in its Q1 2022 investor presentation.

When will the market learn?

As mentioned, shares of The Trade Desk are currently down c.7% at the time of writing — this is due to Snap reporting poor Q2 ’22 results, which were inconsistent with both management’s and also left the analysts’ expectations far behind. The company grew revenue 13% year over year, when it was still forecasting 20% ​​to 25% a few months ago, and in a letter to shareholders blamed a number of factors, including:

  • Platform Policy Changes (Regarding the iOS Privacy Update)
  • Macroeconomic headwinds are disrupting many industry segments
  • Increasing competition for ad dollars, now growing at a slower rate.

The company also opted not to provide Q3 ’22 guidance for revenue and EBITDA — and maybe that’s not a bad idea, because this management team is pretty bad at forecasting. Let’s take a look at how Snap typically performs and how it impacts The Trade Desk.

Snap results affect the trade desk / Snap Press Releases / Excel

Snap has beaten its own revenue guidance just once in the past four quarters and has a habit of missing guidance and underperforming analyst estimates. Every time Snap has missed estimates over the past year, shares of The Trade Desk have fallen at least 6% necessarily.

Given that, the market needs to believe that both Snap’s and The Trade Desk’s performance and results are strongly linked – so if Snap continues to miss estimates, The Trade Desk needs to do the same, right? Not correct.

The trade desk consistently outperformed profits / The Trade Desk Press Releases / Excel

For some reason, the market still doesn’t understand that regardless of how Snap performs, The Trade Desk simply isn’t missing out. Though shares are constantly dragged down by Snap’s earnings, this company continues to deliver for shareholders quarter after quarter — something the market has failed to grasp.

I’m writing this specifically for newer The Trade Desk shareholders who may not be aware of this phenomenon and may be surprised to see their stocks hit out of thin air. The next question is simply this – why? Both Snap and The Trade Desk are in digital advertising. So how come Snap’s earnings are all over the place while The Trade Desk keeps beating every time?

The Core Differences

I think the market’s first mistake is to group everything under “adtech” and assume that if one fails, all must fail (and vice versa). Take these two business models: Snap’s revenue comes primarily from companies running ads on its Snapchat app — but I argued in a previous article that Snap’s target audience of children and young adults isn’t necessarily all that compelling to advertisers. Snap’s results are influenced by both the quality of its Snapchat app itself and the quality of its audience.

On the other hand, The Trade Desk is used by a wide range of advertisers for a wide variety of products – it doesn’t matter where these companies want to place ads, they will use The Trade Desk to get it done. The Trade Desk is heavily integrated with these companies and advertising agencies, while Snap is just one digital billboard among many.

The trade desk is diversified across all major industries

The Trade Desk Q1’22 investor presentation

There’s also the famous privacy changes with Apple’s iOS last year that reduced the ability of mobile apps like Snapchat to effectively target users with advertising. This has been felt across the industry, and is part of the reason even giant Meta’s share price has fallen 45% in 2022.

Now, The Trade Desk’s access to first- and third-party data is one of the ways to increase the effectiveness of ad spend, and there were certainly some concerns after this iOS update severely reduced the data available to advertisers. Still, we’ve seen The Trade Desk consistently deliver better results despite these iOS changes, and management has always been very clear on the impact. According to earnings call for Q3’21:

As we predicted, the recent IOS changes did not have a significant impact on our business and we expect it will continue to do so.

This has been repeated regularly by The Trade Desk and the results prove it. Its extensive partner ecosystem gives the company more than enough access to first-party data to enable it to deal with companies like Apple or Google flexing their muscles. It’s also worth noting that video, which includes Connected TV (TTD’s fastest-growing segment), isn’t impacted by these privacy changes — and as of Q1 2022, it represented ~40% of revenue.

I’m a big fan of Jeff Green, CEO of The Trade Desk, who I consider to be quite possibly the best CEO of any company in my portfolio. He predicted Netflix’s shift to an ad-supported model back in 2018 and has successfully positioned The Trade Desk to cope with an ever-changing advertising landscape; Something like Snap and Meta didn’t make it.


I also ran The Trade Desk to my valuation model in my previous article and everything remains unchanged except for the current market cap. The company still isn’t cheap, but as Mr. Warren Buffett says, buying a wonderful company at a fair price is far better than buying a fair company at a wonderful price.

Trade Desk's stock price valuation model

The Trade Desk SEC filings / Excel

You can find all the details about this model in the previous article.


Snap clearly underestimated the combined impact of an economic slowdown and the postponement of privacy changes on its business this quarter. An economic slowdown or recession could certainly hamper The Trade Desk, as advertising is one of the easiest short-term cuts a company can make.

However, what’s also clear is Snap’s inability to provide adequate guidance and The Trade Desk’s ability to consistently under-promise and over-deliver. Snap CEO Even Spiegel recently said:

Well, the macro environment has definitely continued to deteriorate, and faster than we anticipated when we released our second quarter guidance.

But is the macro environment that bad, or is it just a CEO trying to cover up a poor performance? As another example, NBCUniversal (CMCSA) reported record pre-ad revenue of over $7 billion last quarter, with advertising rates rising year-over-year. According to

Rates rose in the high single digits, driven by strong growth in categories like retail, fast food, consumer staples, technology and streaming. Pharmaceuticals led all categories with nearly 40% growth over last year, followed by travel, which grew 30%.

So it seems like Snap isn’t the perfect barometer for the advertising market and the state of our economy – who would have thought…

bottom line

The market loves a good old knee-jerk reaction, and it delivers exactly that every time Snap reports results, often dragging The Trade Desk down.

But The Trade Desk is a different deal, a better deal, and far more immune to the headwinds that have once again crashed Snap’s stock. Will this pattern repeat itself over and over again? Probably, but I’m very confident that over the long haul, The Trade Desk will continue to deliver for shareholders while Snap continues to disappoint.

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