Adbe vs The Trade Desk
Software solutions will be in high demand as the trend towards hybrid work is set to continue. Software companies Adobe (ADBE), and The Trade Desk, (TTD), should reap the benefits of growing demand for their products. Which stock is better to buy right now? Find out more.
Adobe Inc., a San Jose-based software company, is one of the most diverse and largest in the world. It operates three segments, Digital Media, Digital Experience and Publishing. The Trade Desk, Inc., Ventura, Calif., is a cloud-based self-service platform that allows customers to manage and optimize digital ads in various formats.
The demand for software solutions is high due to their increasing use in many industries including healthcare, retail and technology. The hybrid work culture, which is expected to last for many years, means that software solutions will continue to be in demand. Grand View Research reports that the worldwide business software and services market will grow at 11.3% annually over the next seven year. Established software firms ADBE and TTD can benefit from industry tailwinds.
ADBE’s gains have been 41.5% in the last year while TTD returned 91.3%. TTD’s returns of 9.3% are much lower than ADBE’s 34.4% gain over the last six months. TTD has 10.4%, while ADBE’s 19.5% gain is the clear winner in their three-month performance.
Which stock is better to buy right now? Let’s see.
ADBE unveiled the next generation (CDP) of its Real-time customer data platform on April 27. This platform will enable brands to activate unknown and known customer data, allowing them to seamlessly manage their entire customer journey and profile in one place. It does not use third-party cookies. This is a sign of the company’s dedication to protecting customers’ privacy.
TTD’s new trading platform, Solimar was launched on July 7. It is designed to assist marketers in optimizing their digital advertising campaigns on the open web. Dave Pickles is co-founder and chief technology officer of the company. He said that “Solimar” was the culmination of over two years’ worth of engineering and represents an important breakthrough in finding the best decisions for marketers today.
Recent Financial Results
ADBE’s fiscal second quarter revenue rose 22.6% to $3.84 Billion year-over-year. This was for the period ending June 4, 2021. Digital media revenue for the company increased 25% to $2.79million year-over year, and its document cloud segment grew 30% to $469million year-over year. Non-GAAP net income was $1.46 Billion, an increase of 22.7% over the previous year. Its non-GAAP earnings per share were $3.03 which represents a 23.7% increase year-over-year.
TTD’s first quarter revenue, which ended March 31, 2021 was $219.81million. This represents a 36.8% increase year-over-year. In the last quarter, the company earned $7.78million in operating income compared to $10.77 million the previous year. Non-GAAP net income increased by 61.4% to $70million, and non-GAAP earnings per share increased 56.7% to $1.41.
Future and Past Financial Performance
Over the last three years, ADBE’s revenue grew by 21% and 36% respectively. Revenue is projected to increase by 21.9% this year, and 14.9% next. Analysts predict that ADBE’s earnings per share will rise by 17.1% in the quarter ended August 31, 2021 and 96% in the quarter ended November 30, 2021. It is also expected that its EPS will grow at 18.5% per year over the next five-years.
TTD’s revenue and earnings grew by 38% and 58% respectively over the last three years. Analysts predict that the company will see its revenue rise by 36.3% and 27,9% respectively in 2021-2022. The company’s EPS will increase by 44.4% in the just-to-be reported quarter that ended June 30, 2021 but fall 7.7% in the one-year period ending September 30, 2021. Over the next five year, TTD’s annual EPS growth is projected to be 32%.
TTD’s $895.18 million trailing-12-month revenue of $14.39 Billion is significantly higher than ADBE’s. TTD is 78.88%, 26.91%, and ADBE’s 38.79% net profit margins respectively are lower. ADBE is also more profitable.
ADBE’s ROE and ROA of 45.14% and 13.63% and ROTC respectively compare to TTD’s 27.32%, 4.04% and 7.32%.
TTD’s forward EV/Sales is 33.58x at the moment, which is 78.5% more than ADBE’s 18.81x. TTD’s forward EBITDA/EBITDA (and non-GAAP) P/E, of 94.79x, and 132.44x respectively are greater than ADBE’s 37.64x or 50.49x.
ADBE stock is therefore more economical.
ADBE’s overall rating is B, which means that it qualifies as Buy according to our POWR Ratings. TTD, on the other hand has an overall rating C which is equivalent to neutral. POWR Ratings take into account 118 factors. Each factor is weighted in an optimal way.
ADBE’s Sentiment grade is B. This corresponds with analysts’ expectations that it will reach $626.94 within the next year. It indicates a possible 1.4% upside. TTD, however, has given Sentiment a C rating. This is consistent with analysts’ expectation that the stock will reach $81.21 within the next year. It indicates an potential 1.8% drop.
ADBE also has a B-grade for stability, consistent with its 0.95 beta. TTD however has a D-grade for stability, in line with its 2.49 beta.
ADBE ranks #25 among the 135 stocks within the Software-Application industry while TTD is #70.
We have also given stock ratings for quality, growth, value, and momentum, in addition to what I just said. All ADBE ratings can be viewed here. You can also find all TTD ratings right here.
TTD and ADBE will both benefit from increased demand for software solutions as companies move to remote work and digitalization. TTD is the market leader in data management, but ADBE’s Audience manager has a smaller market share and customer base than TDD. We recommend that you place your bets on ADBE right now, due to its lower valuation and higher profitability.
Research shows that stocks with an overall rating of Strong Buy/Buy increase your chances of success. Here are all of the best-rated software-application stocks.
ADBE shares traded at $618.74 per Share on Wednesday morning. This was $0.46 more (+0.07%). ADBE shares have gained 23.72% year-to-date compared to an 18.01% increase in benchmark S&P 500 over the same period.
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.
The post Adobe vs. The Trade Desk: Which Software Stock Is a Better Investment?This article was first published on StockNews.com
Manisha Chaterjee is the author
Publiated at Wed 28 July 2021, 14:13:04 +0000