The Trade Desk (TTD Quick QuoteTTD - Free Report) is the $34 billion leader in digital advertising, as an innovative demand-side platform (DSP) outside the "walled gardens" of Google and Facebook.

I call them the "CME of Advertising" because of their programmatic platform which enables all ad buyers to set up algorithms based on customer data and targeting -- and then have the program bid for ad space, in real-time, across the web and connected-TV.

These ad buying programs can then run automatically and continuously according to the buyer's budget, geographies and time zones -- just like the modern hedge fund "algos" that scour the financial markets for trading opportunities.

This eliminates time-consuming "insertion orders" for ad buying as the platform serves the ad buyer with instant access to consumer data and markets on endless internet real estate and Connected-TV (C-TV) platforms like Roku (ROKU Quick QuoteROKU - Free Report) .

Dominant Tech Platforms Don't Come Cheap

After another strong beat-and-raise quarterly report on August 9, TTD shares reached for their old highs above $90 but have fallen into a downtrend on the overall pullback in software valuations.

TTD trades for just over 22 times next year's projected sales of $1.5 billion. That's rich, but that topline is growing at 40% this year, and the consensus of 30% growth next year I expect will rise.

Plus, since TTD has been consistently profitable with its "exchange model," when you add the revenue and the profit profiles together, you get a company trading solidly in the upper realms of the "Rule of 40" hurdle for software investors.

To learn more about that metric, see my most recent Cook's Kitchen dive here...

Software Valuations: How to Use the Rule of 40

Since the recent TTD report changed the minds of a lot of Wall Street analysts, I'd also bet good money that the top institutional holder who bought 11 million shares in Q2, Scottish investment fund Baillie Gifford, is probably buying more every chance they get under $70.

Those Scottish Warlords of Investing are all about disruptive technology platforms with 10 to 20-year growth trajectories.

Quarter Details and Outlook

The Trade Desk (TTD Quick QuoteTTD - Free Report) delivered EPS of $0.18, beating the Zacks Consensus Estimate of $0.13 per share. This compares to EPS of $0.09 in the year-ago quarter. These figures are adjusted for non-recurring items.

This beat represented an earnings surprise of 38.46%. Last quarter, TTD "wowed the crowd" even more with a positive surprise of 75%.

TTD posted revenues of $280 million for Q2, surpassing the Zacks Consensus Estimate by 7%, and clobbering the year-ago revenues of $139.36 million by over 100%.

In company guidance, The Trade Desk sees Q3 revenue of at least $282 million, vs. the consensus of about $275M. TTD also forecast Q3 adjusted EBITDA of $100M.

In addition to highlighting the launch of their new service Solimar, on the conference call TTD also revealed that in the second half of the year, Walmart will launch a new DSP, which integrates Walmart shopper data and is built on Trade Desk's platform.

Solimar > Covid

Maybe some of the pessimism around TTD shares at $90 after the report was due to company comments like this...

"Our business has been impacted by the COVID-19 pandemic that has significantly impacted advertiser demand. Like many companies that are ad-funded, we are facing a period of higher uncertainty in our business outlook. We expect our business performance could be impacted by issues beyond our control, such as changing economic conditions or additional shelter-in-place orders that may or may not occur."

To me that sounds like every business on the planet right now. And yet The Trade Desk is a revolutionary platform going into a global advertising market that is headed toward $1 trillion in transactions.

Imagine being a clean, fast, data-driven toll booth for that TAM (total addressable market). That's why I call them the "CME of Advertising."

And Solimar is just the ticket for launch. Here's how they describe the platform's features for the DSP market...

Brands and marketers are pioneering a new marketing normal, one that requires an innovative approach to data-driven advertising. That’s why we created Solimar. Our new platform completely reimagines the media buying experience, putting your business objectives front and center, unleashing the full power of your first-party data, and giving you access to a powerful marketplace of measurement partners.

And here was CEO Jeff Green talking about the exciting opportunities available as they give marketers more useful data -- and let's them securely bring their own data -- without violating privacy concerns of consumers...

"Our growth speaks to The Trade Desk’s position as the default DSP for the open internet. Nowhere is this more apparent than in Connected TV, as more premium streaming inventory becomes available to meet growing marketer demand for data-driven TV advertising. From a customer perspective, more of the world’s leading brands, and their agencies, joined our platform, or expanded their relationship with us.

"We also recently launched our new trading platform, Solimar, the biggest product launch in our company’s history. Solimar allows advertisers to take advantage of many opportunities in front of them today, with features such as simple and secure onboarding of first-party data; the industry’s most advanced cross-channel measurement marketplace; and advanced, multi-level goal-setting which allows our KOA AI technology to optimize campaigns for the trader.”

Analysts Boost Estimates and Price Targets

After the report and conference call, analysts moved their EPS targets much higher. This year's consensus jumped 22% from $0.64 to $0.78, representing steady 13% EPS growth.

And here were some select comments and big price target (PT) bumps...

Truist analyst Youssef Squali raised his PT on The Trade Desk to $92 from $62, noting the company posted solid Q2 results and Q3 guidance and "while visibility beyond next quarter is clouded by the re-opening and variability," the first half performance gives him confidence in the company's ability to exceed Street expectations.

With 2021-2026 estimated sales CAGR of about 30%, valuation on Trade Desk looks compelling to the Truist analyst.

KeyBanc analyst Justin Patterson raised his PT on The Trade Desk to $90 from $74, as the analyst believes TTD continues to benefit from the advertising recovery, with particular strength in C-TV and international. Coupled with the new Solimar update and efforts to improve data onboarding and efficacy, Patterson thinks high 20% to 30% y-o-y revenue growth is very achievable over the medium-term.

DA Davidson analyst Tom White raised the firm's PT on TTD to $95 from $65, citing the company's Q2 results and Q3 guidance that handily beat estimates. White believes The Trade Desk's long-term global opportunity in digital programming is as compelling as ever and that C-TV and online video remain the key drivers of Trade Desk's growth.

White added that the decision by Google to delay the deprecation of third-party cookies in Chrome provides the company with even more time to prepare for this change.

Oppenheimer analyst Jason Helfstein raised his PT on The Trade Desk to $95 from $85, arguing that Q2 results reflect TTD's ability to capitalize on linear TV budget shifting to C-TV. Helfstein adds that strong international growth for Trade Desk continues, with CTV revenue rising over 10-times in AMEA.

Susquehanna analyst Shyam Patil raised his PT on The Trade Desk to $105 from $100, calling it a "must own" stock as he continues to view the company as a multi-year growth story with several key growth drivers in play, notably CTV -- especially internationally -- and shopper marketing via Solimar.

Google's Cookie Twilight Won't Upset This New Monster

And here was one stick in the mud who reluctantly raised estimates...

Citi analyst Nicholas Jones raised the firm's PT on The Trade Desk to $85 from $60, but kept a Neutral rating on the shares. The analyst moved estimates higher on the better Q2 results and outlook than he originally expected. Jones views Trade Desk as a "dominant and best-in-class" ad-tech player, but continues to see risk associated with technology disruption and privacy regulation.

Obviously, he's talking about Google's plan to phase out 3rd-party cookies. But TTD is already planning to innovate past the need for Google's cookies, especially as they want to be agnostic about platforms and hyper-vigilant with consumer data privacy issues.

In the end, I'm betting on TTD to figure out the best ways to track data on consumer shopping and buying behavior without violating their privacy.

Disclosure: I own shares of TTD for the Zacks TAZR Trader portfolio.