The Trade Desk Inc. (TTD) has experienced considerable upward momentum in the past three months and overall had a good year. Trade Desk significantly outperformed the S&P 500, rising by approximately 258.7% compared to the S&P’s gain of about 14.6%. Despite the impressive performance, the company slid on the WhaleWisdom HeatMap to a ranking of 39, down from 17. While its aggressive growth may indicate Trade Desk’s future potential, hedge funds and institutions appear to be taking a conservative investment approach.
Trade Desk is an information technology company that markets an online software platform geared towards digital advertising campaigns. Advertising buyers can purchase these tools to manage their campaigns across social media, mobile devices, and video formats. Additionally, the coronavirus pandemic has positively impacted the Trade Desk. The pandemic-fueled rise in television streaming has resulted in increased and more deliberate advertising spending.
Hedge Funds Sell Despite Recent Gains
Although Trade Desk’s stock has had significant gains in recent months, hedge funds are selling. Looking at third quarter activity by hedge funds, the aggregate 13F shares held decreased to about 5.0 million from 6.2 million, a decrease of approximately 19.6%. Of the hedge funds, 18 created new positions, 29 added to existing holdings, 16 closed them out, and 41 reduced their stakes. Institutions sold off stock at a slower rate than hedge funds with a decrease in aggregate holdings of about 6.9%, to approximately 31.2 million from 33.5 million.
Encouraging Multi-year Estimates
Analysts expect to see revenue grow through 2023, ranging from 22.2% year over year for 2020 to 29.8% growth in 2023; this estimate would grow revenue to approximately $1.8 billion by 2023. Earnings estimates are also very optimistic, with year over year estimated increases that would bring earnings to $9.38 per share in 2023, up from $4.97 in 2020.
Analysts Share Optimism on TTD’s Future
Needham & Co. raised its price target on Trade Desk to $1,000 from $750 and maintained a buy rating on the stock, citing the pandemic tailwind that is believed to continue to yield increased demand. Berenberg Capital Markets noted the IT company’s favorable positioning and sustainable competitive advantage in a large market. Berenberg believes that Trade Desk is the “best way to play” connected television (CTV).
Trade Desk’s impressive 2020 growth is encouraging for investors. The company is well-positioned to continue to capitalize on the rapid growth of CTV advertising, which got a boost due to pandemic related TV streaming. Analysts’ ratings and multi-year estimates present as an attractive metrics to garner the attention of investors.