Skip to main content
Message Font: Serif | Sans-Serif
 
No. of Recommendations: 6
I was writing this up in another forum, thought I just post here. A forever thank you.

***

TTD is #2 in our portfolio. I sold covered calls ATM Tuesday, willing to part ways with ~30% of my shares or just put some cash in my pocket. Looks like cash in the pocket.

My relationship with TTD goes back several years, to Dreamer Dad pounding the drums. I *love* a good drum solo. RIP Neil Peart.

First time I listened to the DD drum solo, bought TTD, it popped the next day ~30% on earnings. Next quarter or two, the pops were only ~20%. Maybe not quite that much, but ENORMOUS.

I don't know who Dreamer Dad really is, or where he lives, or if he likes beer or sweaters. But I will happily buy him a beer or a sweater. After seven buys and two sells my overall position in TTD is +607%. Again, it's our #2 behind CRWD.

As this investing thing goes, complex with no right answer, DD sold too soon. Valuation concerns, which have only continued. Me? I bought seven times in the first two years. I've since sold twice, only to see this Tribble climb back up my 'percent of holdings' every time.

Beers or sweaters?
Print the post Back To Top
No. of Recommendations: 4
Congrats...sincerely!

TTD was a huge winner for me, despite selling too soon (pre Covid).

I dont quite get the valuation. I happened to be reading the CC transcript just now.

The Trade Desk, Inc. (TTD) CEO Jeff Green on Q4 2020 Results - Earnings Call Transcript https://seekingalpha.com/article/4407265-trade-desk-inc-ttd-...

"Q4 revenue was $320 million, a 48% increase from a year ago. For full year 2020, revenue was $836 million, a 26% increase from a year ago"

"Obviously, we benefited from the surge in political advertising last year, which represented a high single digit contribution to our growth in the fourth quarter. "

"North America represented 88% of spend and international represented 12% of spend."

"Operating expenses were $213 million in Q4, up 31% year-over-year. I would like to remind you that due to the virtual environment, our operating expense growth continues to benefit from lower than normal employee support costs, including travel and corporate events, which are running significantly lower than the prior year. "

------

I havent read a Jeff Green CC in a while. Outside of covud mentions, this feels like 2018, 2019, or early 2020.

They are still executing, but the growth doesnt seem to justify 3 straight years of over 100%+ share prive appreciation.

The biggest election of all time gave them a 8-9% boost in q4 it sounds like. Growth under 30% for the year??

OpEx outpaced griwth despite covid cost savings Jeff mentioned.

CTV still equals avod and amazon disney hbomax and netflix are all the biggest streamers and are svod. No ads.

I feel like Intl used to be 15% of the business, so it hasnt grown larger yet? Almost no mention of China in CC.

How much risk is tied to uid2.0 succeeding?

Again...happy for your success. I just dont get why this is over $300.

Maybe it is simply it became hip/trendy due to covid and public awareness of them grew.

The walmart thing is interesting. But amazon publishing was a huge announcement in july 2019 that has since kind of fizzled.

Always have a fond view of TTD though!!

Dreamer
Print the post Back To Top
No. of Recommendations: 1
Over $300? There's some deep money options. My broker won't show me $300 on an ~$840 stock.

Meanwhile, I'll keep putting beer and sweater money in my pocket on short-term covered calls. Happy to trim, or keep you warm and get you drunk.

I owe you.
Print the post Back To Top
No. of Recommendations: 5
up another 7% at the moment...shows what I know! Or at least, shows how good my timing sometimes is or is not.

TTD revenues
2016 $203m, 78% y/y growth
2017 $308m, 52% y/y growth
2018 $477m, 55% y/y growth
2019 $661m, 39% y/y growth
2020 $836m, 26% y/y growth

Note - 2016, 2018, and 2020 were election/political advertising year bumps, too.
Note#2 - you can't have it both ways and complain "well, but they grew 26% in a pandemic", and also say they deserve 200%+ stock price appreciation...it doesn't compute.

Price appreciation (eyeballing it from charts)
2016 $27 at end of year. IPOd in late 2016
2017 $48 at end of year, up 78% y/y
2018 $118 at end of year, up 145% y/y
2019 $272 at end of year, up 131% y/y
2020 $800 at end of year, up 194% y/y

Anyone else notice the inverse correlation here?
Going by this trend, one should hope TTD only has 15% rev growth this year, as the stock will probably go up 400%.

Damn all you people...now I am getting interested in TTD again!!! :)
But it is simply too expensive for me to buy in at these levels, as I have to be able to imagine the upside and exit price, whether it is 6 months or 2 years down the road.

But just looking at it, the share price appreciation is completely out of whack with actual business results.
Subjectively, we can also note that:
CTV is still early innings, but also the biggest streamers are all SVOD and not AVOD, which means no ads.
China - does anyone trust Chinese investments anymore? BABA CEO gets whacked around, Luckin Coffee scams, delisting threats. Trump did a lot of damage. Not saying China doesn't deserve tough love...just talking about the risk/reward of their stocks. I just feel like whatever TTD does there will get replicated by a copycat and they ultimately don't get much. International was (I believe, from memory) 15% of the business a couple years ago, yet they claimed it was growing faster than US on CC but it remains only 12% of the total business.
Apple - hyper fixation on UID 2.0 vs whatever crap Apple is doing around security/cookies. Bottom-line, there is some risk there, but I assume Jeff Green has it handled, so moot point for me.
Walled Gardens - any notable change here yet? Doesn't seem like it.
Amazon Publishing - was a lot of hype, but fizzled in terms of results it seems.
Walmart - this is interesting, but Green's lack of details on arrangement of detail makes if feel a bit like the Amazon Publishing thing...is it really going to be material or is TTD just a tiny tiny piece of the Walmart adtech machine ultimately?

Look - I have always loved the potential of TTD. But if you had me napkin-math the endgame over and over, I can't imagine them getting to be a $100b company. Ultimately they don't own the content...they are a picks and shovel company, getting a cut of things here and there and hopefully everywhere. For perspective, the biggest Ad giants in the world like Publicis and WPP and Omnicom are all worth around $15b. TTD equals all three combined at the moment, which doesn't really compute.

This goes to a larger theme for me, of market caps really not living in reality for many growth companies. Why does Apple double when their revenue went down y/y from 2018 to 2019, and were only moderately above 2018 levels in 2020? What is the justification for that?

These seem to be psychological barriers when they should be physical. When you own stock, what do you actually own? Some answers could be "the price someone is willing to pay" or "the value of that company if it went private or was acquired" or "value based on dividend payouts and predictable stability of their balance sheet and credit"?

But when traders can just drive a Blockbuster-wannabe in GME from $4 to $400, it seems to show that there is a trading or manipulation game underlying the actual value of these stocks. And I am just not comfortable playing in that space. The 2000 market plunge forever burned me...Juniper at $60b, Cisco at $400-500b. Microsoft took about 20 years to surpass their 2000 market cap. So I have seen the market slap the ever-loving silly out of valuations before.

"This time it is different, Dreamer...SaaS...GM%...recurring revenue!" Baloney. Here is a little tip for the future: when everyone is doing SaaS, then no one has an advantage anymore. If my work told me tomorrow that they would switch off Okta to Microsoft SSO, I wouldn't blink...I would just read the directions from IT on what to do, restart my PC, and my world hardly changes. You think Datadog is impossible to quit? What do you think happens when covid ends, and travel expenses, conferences, client events, and other non-digital expenses start to rise? Tell everyone to stay in their homes and that the future is Zoom?

It is a pendulum gang. I could be dead wrong, but that is how I feel, and we cranked the ever-loving hell out of that pendulum in one direction due to covid, and it will eventually swing back.

I hope to be ready to buy when it happens.

Dreamer
Print the post Back To Top
No. of Recommendations: 3
Hello Dreamer,

But it is simply too expensive for me to buy in at these levels, as I have to be able to imagine the upside and exit price

You have recognized long ago the most serious puzzle for long term growth investors in this market. What is too high a price to pay for the best companies with the best prospects? There is little doubt in my mind that the current price for TTD is too high to pay, just as there is little doubt that it is one of the best companies. I am uncertain when you got out. I bought a lot at 30,32,35 and 40. When it got to 280, my gut forced me to bail. Clearly, I left a lot on the table. That said, I still believe in the business (and especially, Jeff Green) but I am uncertain about what price level I would get back in. When you compared the market cap to advertising companies, I think you were off track. I view TTD as a technology leader catering to the advertising industry. To me, CRM might prove to be an analogy. I would put CRM in the late innings and TTD in the early innings relative to growth. CRM's market cap today will probably be equivalent to 2-3 times that amount in a few years as the world pays for quantitative easing with inflation. I see (on a simplistic basis) TTD as a beneficiary of inflation. In an inflationary world, their top line gets a tailwind and they can grow earnings even faster.

I do not think there is any science in valuing companies when the market has assigned too much of a premium. Looking back, my future stance will wait for my gut to tell me the time is right. I will also try to learn from this experience and recognize the difference between a gut saying it is overpriced and market timing which I know does not work on a long term basis. Maybe the answer is to trim when your gut is sending a signal and keep trimming as long as the signal is getting stronger. If one believes that the business has turned down that is a time to go away.

Good luck,

Creelon
Print the post Back To Top
No. of Recommendations: 1
I think you were off track. I view TTD as a technology leader catering to the advertising industry.

---

I got out at $265, by the way. Similar entry prices as you also.

I get your comment above, but my point was more tied to realistic TAM.
The 3 largest ad companies on the planet are just under $45b in mkt cap. They were probably higher a few years ago, but not by a ton. Digital has affected them, obviously.

But I use them as a measure of "companies that can make money off of advertising".
Google and Facebook are different in that they own the content they are monetizing, and their scale is unmatched on the planet, so their ad rev is off the chart.

But when thinking of a picks-n-shovel type of company in the ad space, I think WPP, Omnicom, and Publicis do provide at least a finger-in-the-wind sort of comparison for TTD to aspire to.
And they already passed them combined.

Comparing to Salesforce...I am not sure that fits. But we all could have just invested in CRM and NOW and gone golfing for past 10 years, in retrospect. I think there is a more universal/entrenched aspect to what those companies provide an enterprise vs what TTD provides the world's largest advertisers like P&G. I think you could argue P&G uses TTD, but it NEEDS their SAP/Salesforce/ServiceNow as it is so entwined into what so many employees in their company touch.

TTD likely only touches the mtkg/advertising arm of most companies...at least today.

Kind of nice to be thinking about TTD again.
I don't regret selling at $265 in January 2020.
I do regret not buying around $150 at pandemic low. I really thought about it though, but with Olympics and sports out the window (in that moment in time) and advertisers budgets being slashed due to covid, I could not foresee the nonsensical price appreciation they were about to be given.

I am honest enough to realize even if I did buy back into TTD at $150, I would have probably sold (again) around $250-300, as it was my internal "top range" of what I thought they should be valued at. So I wouldn't have kept them until $800, so no point in daydreaming on those lost gains.

Dreamer
Print the post Back To Top
No. of Recommendations: 3
It is a pendulum gang. I could be dead wrong, but that is how I feel, and we cranked the ever-loving hell out of that pendulum in one direction due to covid, and it will eventually swing back.

I hope to be ready to buy when it happens.


This is the question that most of us here are facing. I mean, in classic MF methodology and over at Saul's, there is no conundrum because it is either BnH or 100% invested and "what, me worry?" And I am not throwing any rocks here. But if you have those mantras, it is comfortable if there is a long way to fall it is because you rode the market so high.

I have no answers. I know what I am doing, but that means nothing. At least Friday was a good day though perhaps not particularly instructive. DW's portfolio, the top performers are all medical related: Dermtech up 15.2%, Fate Therapeutics (an ARKG stock) up 7.9%, Shockwave up 7.1% and Transmedics +6.5%. And Transmedics was quite satisfying because it has done o.k. (but o.k. is euphemism for underperform). Still, I believe in the future of the company and wanted more. I had the opportunity at market open and grabbed it so I doubled the size and ended up +10.9% on the session.

I also added to PLTR when it was down and that one was up 15.2%

Other than that, I sold calls on NET and DDOG so pocketed some good premiums in an otherwise lackluster week. I have most of the SaaS stocks but also a lot of medical related stocks and dogs and cats. I have decided to buy and hold ROKU. I know Dreamer doesn't like it, somewhat biased I think as an unimpressed user. ROKU might be a good conversation.... I have declared that it will be next (second) 10-bagger. Diversification. And still cash although only 18% now. I don't know what else to do.

Have a great weekend. Be safe. I get to spend a 5th day troubleshooting an electrical problem with my driveway lights and security cameras and preparing for a decently strong tropical depression that will arrive tomorrow morning. Never dull here.

KC
Print the post Back To Top
No. of Recommendations: 3
Hello Dreamer,

Thanks for the dialogue. It is helping crystallize my thoughts on the troubling issue of what is a realistic value for these companies enjoying such lofty valuation. WRT to TTD, my interest is in finding a reasonable reentry value.

I believe that one of the things that has kept TTD's value so high even back in 2020 when its growth was stalled, is that it is a profitable, cash-generating machine and the perception is that this condition has a long growth runway ahead. I know that something like price-earnings ratios are old fashioned for the folks bidding these stocks up, but I think you and I each believe that they will matter again someday.

TTD just reported a great Q that blew away the analyst's consensus earnings estimate by nearly 100%. They are projected by that same analyst community to be selling at 174 times next earnings for the forward 12 months. There is no election tailwind for next year and there are strong signals that TTD will increase its operating expenses by a large amount. That said, do you want the over or under wager on the analyst's consensus? I will take the over as I think that travel, sports and entertainment, and others lagging from Covid will increase their ad spend greatly. I believe that TTD will get a greater share of that spend. The question is what level of fwd PE would bring me back into investment? It depends on the direction and level of interest rates. Everything there remaining status quo would get me to a fwd PE of about 75 to begin to reestablish a position. If I feel that the analysts are off by 50% to the downside, then that would mean the price s/b around 580 for reentry to commence. Clearly, we probably have time to work this out.

Best regards,

Creelon
Print the post Back To Top