The Trade Desk and Rocket Lab are both disrupting their respective industries. Which of the two is the better investment opportunity today?
July 10, 2023
Welcome to our 7investing Growth vs Income Summer Stock Challenge!
We are on a quest to find the best current stock opportunity for investors. All month we are pairing popular stocks from both “growth” and “income” style investing up in matchups to determine which will provide the greater upcoming five-year return. We’ve included a voting poll at the bottom of this article: help us determine which of these stock represents the better opportunity for investors!
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In this first-round “growth” matchup, our #2-ranked digital advertising platform The Trade Desk (Nasdaq: TTD) squares up against our #7-ranked satellite launch provider Rocket Lab (Nasdaq: RKLB).
Which of these two stocks will provide the better investment return over the next five years?
Our Summer Stock Challenge begins!
Our first matchup: The Trade Desk ( $TTD ) vs. Rocket Lab ( $RKLB ).
The Trade Desk
5 Year Return: 706%Rocket Lab
5 Year Return: (41%) (since its SPAC debut in Aug 2021)Which company will have the better returns over the NEXT 5 years?
— 7investing (@7investing) July 10, 2023
Today, our digital world is almost entirely on-demand. Whether we’re reading websites, listening to music, or watching movies — we want to find what we’re looking for as quickly as possible.
The Trade Desk (Nasdaq: TTD) has helped advertisers capitalize on our on-demand behaviors. As a demand side programmatic platform, the company makes it easy for large advertising agencies to place the right ad for the right person at exactly the right time.
With legendary entrepreneur Jeff Green at the helm, The Trade Desk has quickly established itself as the innovator of the industry. The company’s Universal ID 2.0 identifier is emerging as the ad world’s most privacy-friendly way to monitor user behavior, winning over advertisers who have raised a skeptical eye at the practices of Facebook and Google.
The Trade Desk’s vision is for an “open internet” where advertisers can measure everything. Green is striving to create a way where every website, mobile app, podcast, streaming channel, or anything else in our digital world can be truthfully compared against one another — allowing smart ad agencies who are their customers to optimize conversions in the channel that provide the greatest ROI.
The Trade Desk has relentlessly been investing in new programs to enable that. Its 2021 release of Solimar allowed customers to leverage AI and choose from over 200 metrics and 300 variables to optimize their campaigns. Its release of Kokai just last month was a further evolution of its AI capabilities. And its ongoing OpenPath beta initiative gives large publishers like USA Today a way to bypass ad auctions entirely, giving ad agencies a direct path to their available inventory and pocketing a greater share of their overall ad spend.
The ad market follows the economy, which has been volatile and struggling this year. The Trade Desk’s revenue grew just 21% in year-over-year comparisons (as compared to 43% a year ago) and its EBITDA margin dropped to 28% (down from 38% in Q1 2022). Some might suggest that a stock priced at 23x sales is too expensive for a company who’s so highly exposed to a challenging macro.
Yet that doesn’t seem to phase Green. With ironclad customer relationships and a laser-focus on innovation, The Trade Desk offers the most comprehensive solution of the entire digital ad industry. Forward-thinking investors should consider hitching a ride to this leader who is running far ahead of the pack.
Rocket Lab (Nasdaq: RKLB) is a dedicated satellite launch provider. For a small fee (typically around $7 million), it will place your small satellites exactly where you would like them, and exactly on the date when you would like to. This high-level of dedicated service leads many to refer to Rocket Lab as the “disruptor” of the space economy. It’s enabling smaller customers to set up shop in orbit on their own terms, rather than waiting for a rideshare opportunity from a larger launch provider like SpaceX.
Since its founding in 2006, Rocket Lab has plowed its money into R&D, optimizing the dependency of its launches as a way to attract larger customers. We’ve noted in our 7investing Community Forum that it has succeeded in winning larger contracts — from helping the Department of Defense track hypersonic missiles to giving NASA a way to place the world’s first satellite in orbit around the moon to providing satellite imagery for commercial customers like Black Sky, Synspective, and Hawkeye360.
And things are about to get a whole lot more interesting. Rocket Lab has dedicated the majority of the $775 million it raised in its summer 2021 SPAC IPO to develop its bigger-and-better Neutron rocket. As soon as next year, Neutron will carry and place entire constellations of satellites into orbit, with a combined payload capacity of up to 8 tons. (that’s 25x greater than its current capacity of 300 kgs). Alongside Neutron’s development, it is also building capabilities to fully recover the first stage of its rockets mid-air, allowing them to be reused again for future missions.
Reusable rockets could cut the company’s costs of goods per mission in half, greatly boosting the profits obtained from each launch. Furthermore, Rocket Lab’s ambitions are to become an “end to end” space company. That means not only building rockets for launch, but also building the satellites themselves and managing their ongoing operations. Just as the infrastructure of cloud computing has served software-based businesses, Rocket Lab is building the infrastructure to serve the space economy.
Led by lifelong rocket scientist Peter Beck, Rocket Lab has aggressively used its capital to acquire other companies with valuable capabilities, highly-technical research teams, and established relationships with larger customers.
Revenue skyrocketed by 240% during this past fiscal year. If the company keeps winning larger contracts, its annual revenues by 2030 will likely be an order of magnitude greater than what they are today.
Investors should keep their eyes on the skies. Rocket Lab has seemingly unlimited potential as the trillion-dollar space economy is launching into a higher altitude.
Will The Trade Desk or Rocket Lab be the better investment for the upcoming five year period? Cast your vote in our live poll below!
Our Summer Stock Challenge begins!
Our first matchup: The Trade Desk ( $TTD ) vs. Rocket Lab ( $RKLB ).
The Trade Desk
5 Year Return: 706%Rocket Lab
5 Year Return: (41%) (since its SPAC debut in Aug 2021)Which company will have the better returns over the NEXT 5 years?
— 7investing (@7investing) July 10, 2023
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