The Trade Desk Rises 6% in a Month: Buy, Hold or Sell TTD Stock?
The Trade Desk’s TTD shares have returned 5.8% in the past month, outperforming both the broader Zacks Computer & Technology sector and the Zacks Internet Services industry. While the broader sector has declined 2.2%, the industry has dropped 4.4% over the same timeframe.
The Trade Desk shares are riding on strong top-line growth driven by an expanding clientele. In the first half of 2024, revenues jumped 27% over the year-ago period, driven by higher spending from new as well as existing clients.
TTD’s self-service cloud-based platform offers automation in ad buying that helps its clients (advertising agencies, advertisers and other service providers for agencies or advertisers) easily penetrate an increasingly fragmented audience amid ongoing digitization of media. It is benefiting from an expanding global footprint, continuing development of the omnichannel ad inventory and strong adoption of programmatic advertising.
These factors have been the major drivers behind TTD’s phenomenal rise. Shares hit a 52-week high of $109.5 on Sept. 18 and finally closed at $108.02, up 50.1% year to date (YTD).
TTD Outperforms Sector YTD
Image Source: Zacks Investment Research
The technical indicator is bullish for The Trade Desk as the shares trade above the 50-day and 20-day moving averages, which indicates robust upward momentum.
TTD Trades Above 50-day & 200-day SMA
Image Source: Zacks Investment Research
Will the momentum continue for TTD? Let’s analyze the strengths and weaknesses.
Strong CTV Demand to Aid TTD’s Top-Line Growth
TTD’s initiatives, namely UID2, OpenPass and Kokai, benefit from increased demand for its advertising services.
The Trade Desk is gaining clientele in the media industry. Roku ROKU and DIRECTV have adopted UID2. Sirius XM Media’s Pandora Media became the first audio publisher to adopt UID2.
LG Ad Solutions integrated UID2 to enable advertisers to leverage their first-party data across LG’s extensive audience network in a privacy-conscious manner.
In the near term, The Trade Desk is expected to benefit from strong spending in the CTV and retail media domains. CTV is its fastest-growing channel, as it reaches more than 90 million households and more than 120 million CTV devices.
TTD benefits from the growing demand for digital and programmatic advertisement. Total advertising addressable market is trending toward $1 trillion, which presents a significant growth opportunity for The Trade Desk.
Expanding international business bodes well for TTD’s prospects. International growth has outpaced North America for the sixth quarter in a row, with CTV driving growth across both EMEA and Asia Pacific.
Expanding Partner Base Aids TTD’s Prospects
An expanding partner base that includes the likes of Netflix NFLX, Disney DIS, Comcast’s NBCU, Walmart, Amazon, Fox, VerticalScope Holdings, foodpanda and LG Electronics has been a key catalyst.
Fox expanded its partnership with TTD through the integration of UID2 and OpenPath across FOX brands and the AdRise technology platform. E.W. Scripps streamlined its programmatic ad-buying process through the adoption of OpenPass and UID2.
2024 Estimate Revision Shows Upward Movement
The Trade Desk estimates third-quarter revenues to be at least $618 million, suggesting growth of approximately 25% on a year-over-year basis. Adjusted EBITDA is expected to be approximately $248 million.
The Zacks Consensus Estimate for third-quarter 2024 revenues is pegged at $619.9 million, indicating year-over-year growth of 25.67%. The consensus mark for earnings is pegged at 40 cents per share, up by a penny over the past 60 days.
The Zacks Consensus Estimate for TTD’s 2024 revenues is pegged at $2.45 billion, indicating year-over-year growth of 25.7%. The consensus mark for earnings is pegged at $1.63 per share, up 3.8% over the past 30 days.
The Trade Desk Price and Consensus
The Trade Desk price-consensus-chart | The Trade Desk Quote
TTD Stock is Overvalued
The Value Score of F suggests a stretched valuation at this moment. TTD stock is trading at a premium with a forward 12-month Price/Sales of 18.85X compared with the industry’s 5.19X.
P/S Ratio (F12M)
Image Source: Zacks Investment Research
Conclusion
The Trade Desk’s strong portfolio and expanding partner base are positive. TTD shares are expected to continue this upward trajectory, driven by these factors, despite a stretched valuation at this moment.
The Trade Desk currently carries a Zacks Rank #3 (Hold), suggesting that it may be wise to wait for a more favorable entry point in the stock. However, investors who already own the stock might expect the company’s growth prospects to be rewarding over a longer term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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