The Trade Desk Inc. (TTD) just recently gave us a new catalyst – and it’s a big one.
Last Friday, I mentioned that they posted an impressive five-year gain of 2,254%, but there’s still plenty of upside ahead, and now is still a great time to claim a stake in the gains still to come.
Back on June 17, the stock did a 10-to-1 stock split. That brought the share price down below $100 a share, opening up investment to a new class of younger, more price-sensitive investors.
We have good empirical data to show this should result in another bull run for the market. Both Tesla Inc. (TSLA) and Apple Inc. (AAPL) both posted big wins for investors after splitting their stocks.
That’s why one of the reasons why I’m predicting two more doubles for TTD in the next three years…
I want to clear up a couple of points about stock splits. As I noted a moment ago, a split lowers the price of the stock and puts it in reach of a wider audience.
It doesn’t however, affect the company market valuation. In other words, a big cap stock that splits even as much as 10-to-1 doesn’t suddenly become a small-cap.
But the lower price attracts younger investors as well as makes the shares more affordable for employees.
And news of the split also generates some earned media that helps improve the firm’s brand by quickly making it more popular.
No, it doesn’t automatically guarantee a pop for the shares. But the right stock split at the right time can be a very powerful catalyst.
Just look at what happened on August 31, 2020 with Tesla Inc. (TSLA). That’s when the stock split 5-to-1, greatly lowering the entry price.
By the time the stock peaked last January 26, it had rallied some 99.5%, or 10 times the S&P ‘s return over the period.
In an up-and-coming new sector like electric vehicles, a good deal on the entry price can make a huge difference. That’s still true for another electric vehicle stock that you can get for just about $4, and that could offer a tenfold return in just a year.
But the best example of a great stock split is probably Apple Inc. (AAPL). The stock’s 7-to-1 split back on June 9, 2014, for example, made investors fortunes.
From that date through August 30, 2020, the stock gained 456.9%.
We’re already starting to see this happen with The Trade Desk.
In the first two weeks after the split went through last June, the stock was up 35%, beating the benchmark S&P 500 over the period by a stunning 2,047%.
I believe the results prove this is a very well-run firm in a great space, digital ads. Bear in mind that on average Americans look at their smartphone screen for 5.4 hours a day, see tons of ads along the way.
Using the company’s cloud-based advertising platform, Trade Desk’s clients can buy ads from more than 70 different exchanges and networks.
We ‘re talking roughly 580 billion ad impressions and roughly 450 million devices per day across the globe.
This is all backed up by Koa, Trade Desk ‘s artificial intelligence (AI) engine that constantly adjusts to account for shifts in consumer surging habits.
See, The Trade Desk lets clients buy spots for a single channel, like only mobile phone screens, or as part of a coordinated campaign.
This could include several different channels such as TV, radio podcasts, web browsers, as well as traditional television spots.
This approach is paying off big time for the firm. In the most recent quarter, they reported per-share profit gains of 100%.
Earnings gains like that have been a powerful lever for the stock. In just the last five years, it has advanced a stunning 2,254%. That’s enough to turn a modest $25,000 stake into $588,500.
But to project future earnings growth, I’m going to be more cautious than assuming more doubles. Instead, I’m going to use its three-year average of 59%.
At that rate, we’d seen earnings double again in roughly 15 months. That would mean our original stake of $25,000 would be worth nearly $1.2 million.
As impressive as that sounds, that’s not the end of the story. The stock is on pace to double again roughly 30 months out, turning our original of $25,000 into 2.4 million in just eight years.
This goes to show you that high tech remains one of the greatest sources of wealth in the world today.
You only need a handful of stocks like The Trade Desk to turn you into a high-tech millionaire in just a few short years.
Cheers and good investing,
Michael A. Robinson