Why The Trade Desk Stock Jumped 25% in Feburary

Shares of The Trade Desk (TTD -0.43%) were among the winners in February, as the leading independent demand side platform (DSP) in adtech posted strong fourth-quarter results and benefited from a rising tide in tech and artificial intelligence (AI) stocks.

According to data from S&P Global Market Intelligence, the stock finished February up 24.8%. As you can see from the chart, The Trade Desk experienced steady growth through the first half of the month before spiking on its earnings report in the middle of the month.

TTD data by YCharts

Trade Desk keeps winning

Shares of the Trade Desk gained through the first half of the month in response to strong earnings reports from big tech companies and others, which signaled that the digital advertising market continued to make a comeback.

In particular, strong results from Meta Platforms seemed to lift the stock on Feb. 2, as Trade Desk gained 4.2% on high volume.

However, the real highlight of the quarter was Trade Desk’s guidance. The company reported strong fourth-quarter results and gave better-than-expected guidance for the first quarter.

For the quarter past, Trade Desk said revenue rose 23% to $606 million, which was well ahead of estimates at $582.2 million. On the bottom line, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) was up 16% to $284 million, and its adjusted earnings per share improved from $0.38 to $0.41, though that was short of expectations at $0.43.

The adtech leader reported another quarter of at least 95% revenue retention, and it continued to make progress with Unified ID 2.0 (UID2), its post-cookies tracking technology. It also gained market share, with gross spend on the platform reaching $9.6 billion.

Finally, Trade Desk expects to begin seeing returns from its new artificial intelligence platform, Kokai, as it gains adoption.

Person looking at a screen with digital images on it.

Image source: Getty Images.

What’s next for Trade Desk?

Looking ahead, Trade Desk sees revenue of $478 million, or another increase of 25% year over year, and it expects adjusted EBITDA to come in at around $130 million.

Trade Desk has performed well during the downturn in digital advertising and looks well positioned to win on the recovery, as Kokai should strengthen its leadership by accelerating advertising insights and increasing ROI for its customers. UID2 also looks poised to be the leading post-cookies tracking solution.

There’s still a lot of growth potential for the company in areas like Connected TV and retail media, and investors should expect the stock to continue to outperform, especially as ad demand picks up.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Jeremy Bowman has positions in Meta Platforms and The Trade Desk. The Motley Fool has positions in and recommends Meta Platforms and The Trade Desk. The Motley Fool has a disclosure policy.

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