Here's Why We're Boosting Trade Desk's Price Target
For now, we’re going to hold off adding additional shares to the portfolio.
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* We are boosting our Trade Desk price Target to $110 from $105.
* Here’s our plan for One rated TTD shares.
We are boosting our price target for The Trade Desk TTD shares to $110 from $105 following the company’s beat and raise quarterly results.
March quarter revenue growth accelerated to 28% year over year from 23%-25% in the last two quarters, while incremental margin expansion drove a nearly 50% increase in adjusted EBITDA for the quarter. While the company repurchased $125 million in shares during the quarter, it had little impact on its bottom-line results for the quarter, which came in at $0.26 per share, $0.04 ahead of the market consensus.
Despite our One rating, with the market short-term overbought, we’re going to hold off adding additional TTD shares to the portfolio, but they remain on our shopping list. Should the shares find their way back toward our cost basis of $84.29, which is also near the 50-day moving average, it would be a good place for us to add more TTD shares.
The quarter’s results and management’s guidance for at least $575 million in revenue in the current quarter, up at least 24% compared to the June 2023 quarter, speaks to the growing adoption of Trade Desk’s advertising platform as well as the accelerating shift to digital advertising.
During the company’s earnings call, management shared that more than 90% of the Ad Age Top 200, the largest 200 advertisers in the world, have run advertising campaigns on Trade Desk’s platform over the last 12 months.
Key Markets
One of the key markets is Connected TV (CTV), which we know better as streaming platforms, the ones that increasingly adopting advertising business models. That includes Disney DIS, NBCU, Walmart WMT, Roku ROKU, LG Electronics, and others, which are leaning into data-driven advertising buying to reach their target audiences.
That migration continues to push on Trade Desk’s business with video, including CTV, accounting for a mid-40% share of revenue in the March quarter. As that becomes a larger part of the company’s mix compared to mobile, display, and audio markets, we should continue to see further margin improvement.
When it comes to the current quarter, Trade Desk forecasts its adjusted EBITDA coming in near $223 million vs. $180 million in the year-ago quarter. That puts its adjusted EBITDA margin for the current quarter at around 38.7% compared to 33% in the previous one.
While there was no discussion about 2024 political spending, we continue to see this as a tailwind for ad spending this year. The same is true with the 2024 Olympics, which run from July 26 to August 11. Both suggest stronger 2H revenue prospects for Trade Desk with video being a driving factor.
As Trade Desk’s mix pivots even further toward video, something we see as very likely given the growing number of video-capable devices, we should see even further margin expansion and EPS growth in the following quarters.
At the time of publication, TheStreet Pro Portfolio was long TTD, WMT.
