Pinterest (PINS) vs Trade Desk (TTD): which stock is a better buy?

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The online advertising market is estimated to experience double-digit growth over the next five years, after being heavily boosted by the wave of digital transformation brought on by the pandemic. Social media sites and other online platforms appear poised to maintain the positive momentum, in terms of traffic flow, even beyond the COVID era.

The growing adoption of digital tools by advertisers and data-driven advertising campaigns have been a boon for companies like Pinterest, Inc. (NYSE: PINS) and The Trade Desk, Inc. (NASDAQ: TTD). They help advertisers find their target audience and convert leads into offers. Businesses have seen their market value increase several-fold since the early days of the pandemic amid an increase in the number of business owners using their platforms to plan and evaluate marketing efforts.


How has the social media industry changed over the past year?


The Pinterest content discovery portal is different from other social media platforms like Twitter Inc. (NYSE: TWTR) and Facebook Inc. (NASDAQ: FB) in many ways. Unique offerings, ranging from cooking recipes to interior decorating tips and inspirational content to videos, give the company an edge.

Innovation

Currently, the San Francisco-based visual discovery engine is working to take full advantage of growing user traffic by incorporating additional features such as tools for visitors to share creations, ask and answer questions, and share. advices. These efforts, focused on the quality of the content and improving the user experience, would require heavy investments which, in turn, would weigh on the results in the future.

Pinterest turned profitable in the second half of fiscal 2020, ending a streak of losses, and has maintained the positive trend since then, while generating higher-than-expected profits. In the most recent quarter, the company posted adjusted earnings of $ 0.25 per share on revenues of $ 613.2 million, more than double the level of the previous year. It had around 454 million active users at the end of the quarter.

Pinterest shares have seen high volatility in recent months, after entering 2021 on a bullish note and peaking in the first weeks of the year. While the slowdown appears temporary, the price drop can be seen as a buying opportunity, especially given the stock’s bullish outlook. However, the emerging COVID scenario and volatile consumer trends are dampening its near-term outlook. The stock traded higher on Wednesday afternoon, holding slightly above the $ 50 mark.

Demand side platform

Digital advertising solutions provider The Trade Desk offers a platform for marketers to plan and optimize their advertising campaigns across multiple channels, with a high level of transparency compared to other portals like Google. The reliable, demand-driven model gives it an edge over its competition and the content-free platform helps expand the customer base.

Interestingly, the Ventura-based company competes with industry leaders like Alphabet Inc. (NASDAQ: GOOG). Additionally, virus-induced demand growth has helped the company significantly improve its market position.

Bullish view

Market watchers are as bullish on TTD as they are on PINS, but the former is slightly expensive. While the target price is equally impressive, implying that the stock has enough room for growth, the valuation is likely higher. After making strong gains since the start of last year, Trade Desk stock has pulled back and has lost 13% so far this year. It was trading at $ 69.06 in the closing hours of Wednesday’s trading.

Trade Desk’s quarterly profit has consistently exceeded estimates over the past few years. In the second quarter of 2021, profit doubled to $ 0.18 per share, supported by a sharp increase in revenue to $ 280 million.

Overall, the future looks bright for social media platforms and ad technology companies, thanks to the steadily increasing number of internet users and the popularity of smartphones.

Where to invest

From an investment perspective, Pinterest seems better positioned to grow the business for the long term, thanks to its experience with social media that gives the business access to the important data needed to track user behavior and users. market trends. More importantly, continued user engagement would help Pinterest strengthen its ability to deliver relevant information to customers.


Read management / analyst comments on Pinterest’s second quarter results


On the other hand, Trade Desk’s content neutrality strategy does not allow it to access such valuable information. While the company’s long-term growth prospects are impressive, there are fears that the business may experience a slowdown as the market reopens. Many of the new trends would remain, but media consumption is likely to decline. Meanwhile, the impact on Pinterest would be moderate, as the social catalog model and social networking features would help it retain users.


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