Trade Desk Emerges As Leading Ad Buyer, Gaining From Mobile Ad Shift To CTV, Walmart-Type Deals, Analyst Says
- Needham analyst Laura Martin reiterates Trade Desk Inc (NASDAQ: TTD) with a Buy and a $68 price target.
- After tracking 11 ad tech companies, Martin flags TTD's productivity, which was not materially higher than the smaller ad tech companies. TTD's productivity has steadily fallen in the past five quarters.
- Also, TTD's FY23 FTE guidance is for more hiring (albeit slower). By contrast, many competitors laid off FTEs during FY22, implying productivity gains as FY23 progresses.
- Still, TTD is the largest demand-side platform (i.e., the buyer of ads) in the "Open Internet," with $7.8 billion of total ad spending using its platform in 2022A, representing 15% of total Open Internet ad spending in 2022. Scale economics are powerful economic value drivers in online businesses, Martin believes.
- CTV (connected TVs) and RMNs (Retail Media Networks) drive upside to revenue growth, and higher TAMs elongate TTD's growth runway.
- Martin believes that the most extensive mobile Walled Gardens like Alphabet Inc (NASDAQ: GOOGL) Google Search, Meta Platforms Inc (NASDAQ: META), Snap Inc (NYSE: SNAP), and YouTube are losing share to the Open Internet, driven by the shift from mobile ads toward CTV ads.
- Martin believes the shift from mobile to CTV ads accelerated during COVID lock-downs as consumers shifted time from mobile toward CTV devices, Apple Inc's (NASDAQ: AAPL) iOS privacy changes which lowered mobile's targeting signals and ROAS (return on ad spending).
- Martin highlights Walmart Inc (NYSE: WMT)-type deals adding to shopper marketing TAM upside, TTD's Unified ID2 solution being more about creating a targeting and measurement competitive advantage for the Open Internet versus Walled Gardens and TTD's Open Path product adding efficiency to the Open Internet and accelerates the adoption of UID2 by publishers.
- Price Action: TTD shares traded higher by 4.23% at $60.34 on the last check Thursday.
Latest Ratings for TTD
| Date | Firm | Action | From | To |
|---|---|---|---|---|
| Mar 2022 | Guggenheim | Initiates Coverage On | Buy | |
| Mar 2022 | Benchmark | Initiates Coverage On | Hold | |
| Feb 2022 | Keybanc | Maintains | Overweight |
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