This report was generated using published research from our Communications team led by Sector Head Andrew Freedman. If you want to access more Communications research, CLICK HERE.
The Trade Desk (TTD) is a leading global demand-side platform (DSP) in the programmatic advertising industry. Their service enables advertising agencies and brands to purchase highly targeted, data-driven digital advertising space across various channels (display, video, mobile, audio, social, etc.). They operate an independent platform not tied to any specific media owner, ensuring objectivity for buyers.
Investment Thesis
The Trade Desk operates in a large and expanding global digital advertising market, gaining traction with increasing shares from programmatic advertising. The company strengthens its market position through strategic partnerships, such as with Walmart Connect, which provides access to valuable first-party shopper data. Known for its advanced technological capabilities, The Trade Desk features strengths in data analysis, real-time bidding, and various integrations. It is also proactively preparing for a future without cookies by investing in UID2.0 (Unified ID Solution 2.0). The company benefits from the renewed growth in display advertising, which is driven by improved targeting and measurement techniques.
Additionally, The Trade Desk experiences network effects as its expansion enhances data insights, attracting more advertisers. It is looking at significant growth opportunities in international markets and captures more direct business as brands increasingly move programmatic buying in-house. Under the leadership of CEO Jeff Green, the management team has demonstrated strong execution capabilities. Furthermore, The Trade Desk is well-positioned to benefit from ongoing industry consolidation, aiming to capture more market share as the DSP industry continues to evolve.
FINANCIALS
The Trade Desk demonstrates consistent year-over-year revenue growth, maintains high gross margins with a trend towards higher profitability, and generates strong cash flow from operations. The company trades at a premium valuation, which reflects its robust growth prospects and strong market positioning.
Risks
The Trade Desk continues to face stiff competition from giants like Google and Meta and must navigate shifting privacy regulations. Additionally, it is subject to the cyclical nature of advertising spending, which introduces economic volatility into its business model.
Conclusion
The Trade Desk shows upside over a TAIL (3 years or less) duration, driven by its strategic initiatives in retail media along with its strong market position. Political spending is also expected to become a significant factor through 2024. Revenue is projected to grow in the high-teens percentage without political contributions and in the low- to mid-twenties percentage with political contributions.
