Company Reports

Continued strong advertising demand fueled growth at The Trade Desk during the first quarter. Total revenue increased 28% versus a year ago, modestly faster growth than that seen among ad behemoths Alphabet and Meta while handily outperforming Google’s ad network. While we expect ad spending growth will moderate in the coming quarters, we also expect TTD will continue to gain share. Our fair value estimate remains $52 per share. With the shares trading at 17 and 40 times our 2024 revenue and adjusted EBITDA estimates, respectively, we still believe the valuation is stretched.

The Trade Desk has become one of the leading technology platform providers for advertisers and their ad agencies to purchase ad inventory made available by various publishers or content providers. We expect this demand-side platform provider, which helps ad buyers manage programmatic ad campaigns, will benefit from the ongoing growth of digital advertising spending.

The Trade Desk’s fourth-quarter results mostly matched our projections, confirming our view that management’s growth guidance was too conservative. Advertising spending continues to increase with economic growth, especially in the two areas on which the firm is focused—connected television and retail media—which are still in their early growth phases. Plus, as we assumed, international demand for connected TV ads remained strong, undeterred by geopolitical issues.

The Trade Desk has become one of the leading technology platform providers for advertisers and their ad agencies to purchase ad inventory made available by various publishers or content providers. We expect this demand-side platform provider, which helps ad buyers manage programmatic ad campaigns, will benefit from the ongoing growth of digital advertising spending. As more digital content becomes available to consumers on various devices, including mobile and connected TV, we estimate the digital ad market will grow 6% annually on average through 2028.

The Trade Desk reported another strong quarter beating management’s expectations on the top- and bottom line. Fourth-quarter revenue guidance was weaker than we anticipated and we believe the firm is either too cautious or may be facing some pressure on take rates. We did not make significant adjustments to our model and our revenue projection remains slightly above the firm’s guidance. We are maintaining our $48 fair value estimate, which represents more than 9 times and 20 times our 2024 sales and adjusted EBITDA estimates, respectively. We continue to view the shares of no-moat The Trade Desk, which are trading at sales and adjusted EBITDA multiples of 15 and 38, respectively, as overvalued.

The Trade Desk has become one of the leading technology platform providers for advertisers and their ad agencies to purchase ad inventory made available by various publishers or content providers. We expect this demand-side platform provider, which helps ad buyers manage programmatic ad campaigns, will benefit from the ongoing growth of digital advertising spending. As more digital content becomes available to consumers on various devices, including mobile and connected TV, we estimate the digital ad market will grow 7.3% annually on average through 2027.

We increased our fair value estimate for The Trade Desk slightly to $48 from $46. Unlike its advertising supply-side peers, the demand-side platform provider continues to experience improving demand from advertisers and ad agencies. The firm has positioned itself well to benefit from growth in the connected TV market and expanding digital ad spending among retailers and on their online properties.

Like its peers on the supply side, first-quarter numbers for demand side platform provider Trade Desk pointed toward increasing adoption of programmatic advertising and a recovery in digital advertising, which likely will strengthen in the second half of this year. We still view Trade Desk as the leading ad-tech provider on the demand side as it leads the increasing adoption of programmatic advertising within the connected TV channel and seeks more ad inventory in non-walled-garden properties for its clients, advertisers, and their agencies.

The Trade Desk’s solid fourth-quarter results support a few of our assumptions about the firm and the digital ad market, including continued strong growth of the connected TV market, that an increasing number of clients will sign multiyear agreements, ad spending will continue to shift away from “walled garden” sites or apps like Facebook, and adoption of the firm’s universal identifier offering, UID 2.0, will steadily expand.

The Trade Desk has become one of the leading technology platform providers for advertisers and their ad agencies to purchase ad inventory made available by various publishers or content providers. We expect this demand-side platform provider, which helps ad buyers manage programmatic ad campaigns, will benefit from the ongoing growth of digital advertising spending. As more digital content becomes available to consumers on various devices, including mobile and connected TV, we estimate the digital ad market will grow 7.3% annually on average through 2027.

We are initiating coverage of The Trade Desk with no-moat and stable moat trend ratings and a $43 fair value estimate. We recommend waiting for a margin of safety before investing, as the shares, to which we assign a Very High Morningstar Uncertainty Rating, are trading in 3-star territory.

The Trade Desk has become one of the leading technology platform providers for advertisers and their ad agencies to purchase ad inventory made available by various publishers or content providers. We expect this demand-side platform provider, which helps ad buyers manage programmatic ad campaigns, will benefit from the ongoing growth of digital advertising spending. As more digital content becomes available to consumers on various devices, including mobile and connected TV, we estimate the digital ad market will grow 7.3% annually on average through 2027.