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Wells Fargo starts TTD stock at Buy; Citi expects 'strong beat and raise' Q3 print

investing.com 29/10/2024 - 12:46 PM

Investment Coverage Initiated for The Trade Desk by Wells Fargo

Wells Fargo initiated research coverage on The Trade Desk (NASDAQ:TTD) with a Buy rating and a $150 price target ahead of the company's upcoming Q3 earnings report.

Positive Outlook Factors

In a note to clients, Wells Fargo highlighted several factors contributing to their positive outlook:
Amazon's Shift to Connected TV (CTV): Increased advertising spend on CTV, especially with the introduction of ads on Amazon Prime Video, is expected to benefit The Trade Desk.
Partnerships: New partnerships are anticipated to ramp up, enhancing growth opportunities.
Competitive Landscape: Regulatory distractions faced by Alphabet Inc (NASDAQ:GOOGL) offer competitive advantages to The Trade Desk.

Industry Trends

Analysts indicated that publishers are responding to Amazon's advertising strategy by:
– Increasing ad load by approximately 20%.
– Reducing Cost Per Mille (CPMs).

Wells Fargo analysts noted, "Increased scale of inventory + better pricing have accelerated the shift from linear to CTV, more than offsetting any competitive impact to TTD."

Future Growth Potential

Wells Fargo projects The Trade Desk will benefit from unlocking inventory on Roku (NASDAQ:ROKU) and Netflix (NASDAQ:NFLX) in 2025 and 2026. Their revenue estimates for those years are 6% and 8% ahead of consensus, respectively. The integration with Netflix and Roku is expected to add approximately 400 basis points to gross spend growth in 2025, allowing The Trade Desk’s revenues to surpass consensus predictions.

Market Dynamics

The firm expects sustained market share gains for The Trade Desk from Google's DV360 due to ongoing legal challenges faced by Alphabet. Analysts believe these legal challenges might lead to “underinvestment & lack of focus” at Alphabet rather than significant changes in business models or industry structure.

Citi’s Outlook

Citi analysts share an optimistic view, predicting “another strong beat and raise quarter” for The Trade Desk, attributing it to:
– Continuing growth drivers: CTV, Retail Media, and market share gains.
Potential for political spending, which could further enhance revenue.




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