Broadly speaking, growth stocks are expected to increase revenue and earnings at a faster pace than the rest of the market. They typically don't pay dividends, since their focus is on reinvesting in the business - and in fact, many of Wall Street's favorite growth stocks are not yet profitable.
While growth stocks carry somewhat higher risk compared to their more well-established counterparts, they also offer the potential for outsized capital returns, which is why so many investors continue to include these names in their portfolios.
Here's one growth stock that's been beating the market handily in 2024, with analysts forecasting more upside in store.
About Trade Desk Stock
The Trade Desk Inc. (TTD) is a technology company that offers an advertising platform to its clients, including a demand-side platform that handles display, social, mobile, and video advertisements. The cloud-based platform allows users to create, manage, and optimize multi-channel campaigns, powered by tools such as KoKai artificial intelligence (AI) and cross-device targeting.
Valued at $53 billion by market cap and based out of Ventura, California, the Nasdaq-100 Index ($IUXX) company operates across the U.S., Europe, and Asia.
TTD stock has outperformed this year, delivering YTD gains of 51%, compared to a return of 17.7% for the broader Nasdaq-100.
Longer-term, TTD is up 38.8% over the past 52 weeks, and has gained 447% over the past five years. The shares are currently only about 5% away from their all-time highs around $114, set in November 2021.
Priced at 67.66x forward earnings and 21.85x times forward sales, it's fair to say this growth stock commands a premium valuation relative to the rest of the tech sector. However, the current multiples represent a discount to TTD's 5-year historical average valuations, which hover around 85x earnings and 23x sales.
Trade Desk Tops Q2 Estimates
The Trade Desk reported its Q2 earnings results in early August, which topped Wall Street's revenue and earnings estimates. The company posted revenue of $584.55 million against a consensus estimate of $577.51 million, recording a solid 26% rise YoY.
Q2 earnings totaled $85 million, or $0.39 per share on an adjusted basis - outpacing the average $0.36 per share forecast, and marking a 40% rise from the same quarter last year. Adjusted EBITDA margin improved to 41% year over year.
The cash and equivalents balance at the end of the quarter was $1.5 billion, with no debt on the balance sheet.
“I've been incredibly encouraged by the early results from Kokai,” said CEO Jeff Green on the conference call. “For those campaigns that have moved from Solimar to Kokai in aggregate, incremental reach is up more than 70%. Cost per acquisition has improved by about 27% as data elements per impression have gone up by about 30%. In addition, performance metrics have improved by about 25%, helping to unlock performance budgets on our platform for years to come. So our clients are getting more precise, more cost efficient and then they're able to reinvest for even more reach and drive a much better return on ad spend.”
For the third quarter, management guided for revenue of $618 million, up 25%, on adjusted EBITDA of approximately $248 million, which came in higher than Wall Street's expectations on both counts.
What's the Analyst Forecast for TTD Stock?
Analysts are clearly bullish on the stock, as evidenced by the consensus “Strong Buy” rating on TTD. With 31 analysts in coverage, 23 have a “Strong Buy” rating, along with 2 “Moderate Buys,” compared to just five “Holds” and one “Strong Sell.”
TTD is trading nearly flat with its mean price target of $110.44. However, the Street-high price target of $135 suggests the stock could keep climbing another 24% from here.
While TTD may continue to experience some short-term congestion around its prior highs in the $114 area, investors looking for a solid growth stock to buy and hold for the long term may want to consider this fast-growing digital advertising player.
On the date of publication, Ruchi Gupta did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
