The Trade Desk (TTD) had a banner year in 2020, together with most tech stocks. The global technology company saw its share price soar as earnings doubled, but there is now some concern as to whether TTD stock can push any higher.
Since hitting all-time highs of $972.80 in December 2020, TTD has fallen around 30%, but there are certain factors at play that could reverse the recent pullback and send shares back up to prior highs and beyond.
With the digital advertising market set to continue with its recovery, the company could continue to outperform analyst expectations. Another possible catalyst could be the adoption of the company’s proprietary application that aims to provide a solution to changes in Alphabet’s (GOOGL) third-party tracking and cookies policy.
How Crumbling Cookies Became An Opportunity For TTD Stock
At first glance, Google’s recent decision to phase out third-party cookies might seem like bad news for The Trade Desk. Cookies are the tracking files used to collect the personal data of internet users and have been a vital tool for targeted advertising, and the bread-and-butter for programmatic advertising companies like TTD.
So, how is this not a problem for TTD stock?
This change is certainly a challenge, but TTD was quick to identify that the ‘cookie was about to crumble’ and set a backup plan in motion.
The alternative is Unified ID (UID). This open-source application could be a win-win for all parties.
UID provides marketers with what they need, which is data for the deployment of targeted advertising. Customers, on the other hand, are able to remain anonymous, thereby providing a solution to well-publicized concerns regarding data privacy.
Not only does this technological game-changer help The Trade Desk side-step Google’s potentially detrimental changes, but UID could also provide it with an additional edge in the digital advertising space.
Following The Recent Pullback, A Rebound Remains Possible
The impending end of third-party cookies on Google hasn’t been the only worry for TTD investors. Like with most tech stocks, valuation concerns have also had a negative impact on the share price.
The Trade Desk currently sports a forward price-to-earnings (P/E) ratio of 130x. While this may be in-line with other fast-growing tech companies, it’s still a frothy valuation. With high expectations already priced-in, any sort of stumble, or a further market correction, could mean additional losses for this high-flyer.
Despite forward multiples factoring in the long-term prospects for TTD stock, the path remains for shares to not only bounce back to prior highs, but to possibly surpass them.
The company handily beat sell-side earnings projections in its most recently reported quarter and if this continues, shares could continue to move in the right direction.
What Analysts Are Saying About TTD Stock
According to TipRanks, The Trade Desk comes in as a Moderate Buy. Of the 13 analysts who provided ratings on the stock in the last three months, 8 recommend a BUY, 5 suggest a Hold, while none advise a Sell.
As for price targets, TTD stock has an average analyst price target of $925.92 per share, which implies around 36% upside potential from current prices. Analyst price targets range from a low of $730 per share to a high of $1,010 per share. (See The Trade Desk stock analysis on TipRanks)
Bottom Line: Still Pricey, But There’s Room For Higher Prices In The Near-Term
Despite falling around 30% from its all-time highs, TTD remains a richly priced stock. Only time will tell whether tech high-flyers like this one can sustain triple-digit forward multiples, but further developments in its game-changing Unified ID alternative to traditional cookies could help move the needle. So could better-than-expected results from a continued recovery in advertising demand.
In short, investors might have enough to justify bidding TTD back up to nearly $1,000 per share, and beyond.
Disclosure: Thomas Niel held no position in any of the stocks mentioned in this article at the time of publication.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.
