The Trade Desk Stock Rises on Q3 Earnings Beat—Is It a Buy?

On Nov. 6, The Trade Desk stock rose 26.6 percent after the company reported better-than-expected third-quarter earnings results. Here are the technology company's third-quarter highlights and its stock outlook.

The Trade Desk reported its third-quarter earnings results on Nov. 5 after market hours. In the third quarter, The Trade Desk reported adjusted EPS of $1.27, compared with $0.75 in the third quarter of 2019. The adjusted EPS beat analysts’ average estimate of $0.42. The Trade Desk generated sales of $216.1 million in the third quarter, 31.6 percent more than it did in the third quarter of 2019. The software company beat analysts’ average sales estimate of $180.2 million.

TTD stock was up about 1.7 percent at $833 as of 5:01 a.m. ET in premarket trading today. The stock rose 26.6 percent on Nov. 6 and closed at $819.34 with a market capitalization of $38.5 billion. TTD stock has risen by 46.5 percent in the last five days and 277.6 percent in the last year.

TTD stock is trading 3.3 percent below its 52-week high of $847.50 and 502.5 percent above its 52-week low of $136. Year-to-date, the stock had risen by 215.4 percent as of Nov. 6.

TTD stock has become a major talking point on Stocktwits and other social networking platforms. While some investors on Stocktwits see the company's strong sales outlook for the fourth quarter as a good reason to buy TTD stock, others are bearish and expect the stock to fall.

Currently, analysts' average stock price forecast for TTD is $646.29, which suggests a 21.1 percent downside. Their highest target price of $925 implies a 12.9 percent upside, while their lowest target price of $217 suggests a 73.5 percent downside. Among the nine Wall Street analysts tracking TTD, eight recommend “buy,” and one recommends “hold.” None of the analysts recommend “sell.”

I believe The Trade Desk stock is a buy right now based on the company's strong growth outlook. The Trade Desk expects consolidated fourth-quarter sales of $287 million–$291 million, while Wall Street analysts expect the company to post revenue of $252.6 million.

Furthermore, The Trade Desk's third-quarter earnings results showed growth in its CTV (connected TV) business, with CTV revenue growing more than 100 percent year-over-year. And the company still has a significant opportunity to capture that business's rising ad spending.

Roku and Twilio are some high growth mid-cap stocks that have surged significantly this year. Roku stock has gained 89 percent, while Twilio stock has gained 197 percent.