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Wedbush Securities began coverage of The Trade Desk (NASDAQ:TTD) with an Outperform rating and a $110 target price.
The Ventura, Calif.-based company offers a cloud-based platform that allows buyers to measure data-driven digital advertising campaigns across various ad formats and channels.
Analysts led by Scott Devitt noted that they see multiple drivers for the company’s sustainable and over 20% topline growth.
These include — ongoing shift to programmatic Connected TV, or CTV, advertising from linear TV; offsite retail media growth; and international expansion supported by recent investments to increase share outside the US.
Near-term, the analysts see several catalysts which could drive upside to estimates, including tailwinds from U.S. political spend in the second half of 2024 and the rollout of recent CTV partnerships with key publishers.
Wedbush’s estimates for 2024 and 2025 revenue are 1% and 3% above consensus, respectively, and it expects the company will sustain a 22% compound annual growth rate, or CAGR, over the next four years.
The analysts said that total digital advertising spend is expected to reach $677B in 2024 (+12% year-over-year) and they expect The Trade Desk will continue taking share of spending outside walled gardens. The open internet represents around $130B total addressable market, or TAM, based on their estimates, of which TTD represents about 9%.
Walled gardens account for about 80% of digital advertising spending but only capture 39% of the time Americans spend online. The open internet’s share of time spent has grown over the past decade, rising to 61% in 2023 from 38% in 2014. The analysts think there is an opportunity to narrow the gap between share of time spent and share of digital ad spend as the relative value of the open internet improves.
The analysts think there is upside to industry CTV estimates, which appear conservative, given the ongoing increase of CTV advertising inventory, growing ad-supported viewership, shifts in sports content rights, and improvements in targeting and measurement of ads on CTV properties.
Wedbush’s base case assumes The Trade Desk’s U.S. CTV spend grows at a 19% CAGR through 2028. Meanwhile, the upside scenario, which assumes a faster shift away from linear TV to programmatic CTV, implies around 23% CAGR through 2028.
Devitt and his team noted that retail media as a category is well-positioned to take share of global digital advertising. The Trade Desk is the leading Demand Side Platform, or DSP, for offsite retail media ads and the company works with hundreds of retail partners, including Walmart. Offsite retail media is anticipated to generate about $11B of digital ad spend in the U.S. in 2024, rising +62% year-over-year and is expected to increase at +34% CAGR through 2028, outpacing the broader digital advertising industry, according to the analysts.
Wedbush added that International arena is a relatively untapped opportunity for the company. The analysts estimate The Trade Desk’s international penetration of its core TAM is less than 2%. The company is investing to increase its international sales force and client services team, and recently made progress expanding international inventory and partnering with data providers/retailers outside the U.S.
The Trade Desk (TTD) has a Hold rating at Seeking Alpha’s Quant Rating system, which consistently beats the market. The Seeking Alpha authors’ average rating is also Hold, but the average Wall Street analysts’ rating is more positive, with a Buy.
