Tech stocks have taken somewhat of a beating recently as the Nasdaq has gone down faster than the overall market. This tech-filled index is only down just single digits from its high, but it might go lower. Savvy investors often use a “ready-to-buy” list if the market crashes. We asked two contributors which stock they would buy during any market pull back in October. They said The Trade Desk and StoneCo.
The Trade Desk
Advertising is in the middle of a once-in-a-generation change. Viewers no longer use schedules for viewing. The one-size-fits-all advertising strategy is going away. Target markets are now scattered as they are hard to reach. That is where The Trade Desk comes in.
The company’s tech platform is not bound by traditional constraints and can assess 12 million ad impressions every second. This not only gives marketers more for their money but also helps them better target a fragmented market.
Rather than competing against the world’s largest ad agencies, it partners with them to use data it gathers to boost its algorithms. The company uses very advanced technology to make very fast decisions with great precision.
Also, The Trade Desk is not concerned about the death of cookies (announced recently by Google) for several reasons. First, the company has created its Unified ID 2.0, the best accepted alternative to cookies in the industry. The platform has been used by a growing list of top tier names in the world of advertising, giving The Trade Desk a big edge.
The company’s recent results paint a great picture. Revenue in Q2 grew 101% y/y/, though that was partially because of easy comps. At the same time, EPS also doubled, and customer retention stayed higher 95%, which it has done each quarter going back seven years.
Finally, when looking for a stock to purchase during a crash, historical perspectives matter. In Feb. of 2020 — as panic about ad spending set in — The Trade Desk stock was among the ones hardest hit, falling around 54%. However, after hitting the bottom in March, The Trade Desk then went much higher, climbing over sixfold from its lows and over triple its past all-time high, which it hit just before the start of the covid pandemic.
This Brazilian fintech stock is a company Warren Buffett’s team bought before its 2018 IPO.
StoneCo has earned business by getting rid of the “bureaucracy.” It goes to the client, finding places of demand, and then quickly opens offices close to its customers. This personal touch has led to its fast stock and revenue growth in previous years.
But covid hit Brazil especially hard, dramatically slowing the firm’s growth. Also, challenges with a new credit registry system forced StoneCo to freeze new loans temporarily, and CEO Thiago Piau said “was a negative influence” on reported revenues.
Consequently, in the first part of 2021, revenue of less than 1.5 billion Brazilian reais ($270 million) increased only 7% compared with the first part of 2020. This is a big decline from the 63% revenue growth seen for the 12-month period in 2019 right before the covid pandemic started. Also, the firm would have had a loss in the first two quarters of this year if not for an R$841 million ($153 million) unrealized gain on their investment in Banco Inter.
Also, the company continues to reveal signs of good expansion. In the first part of 2021, the overall payment volume (TPV) of R$111 billion ($20 billion) went up by 47% compared the first six months of 2020. Furthermore, active clients of almost 767,000 went up by 45% over this same period. Such numbers show that once StoneCo can get beyond the pandemic and the credit system problems, massive growth in the stock and the company should resume.
Author: Blake Ambrose
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