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The Trade Desk’s King-Sized Market Opportunity
Stock Analysis & Ideas

The Trade Desk’s King-Sized Market Opportunity

The Trade Desk’s (TTD) cloud-based advertising platform enables buyers to engage in data-driven digital advertising campaigns in various advertising formats. Just about anyone can place a digital ad on the platform and have it appear across the globe.

The company is a dominant name in the digital marketing industry, benefiting significantly from the massive shift from traditional media towards digital media. Its Koa AI-based system, which can read and analyze 9 million queries in a second, runs on a unique algorithm —the more ads placed, the wider the company’s data-collecting capacity, and the better the platform can target a specific audience for a specific ad.

Moreover, the platform offered by Trade Desk is based on Software-as-a-Service (SaaS), a model which has witnessed massive growth in the past few years because of the reduced costs and time, as well as various other benefits that it offers organizations.

Continued technology upgrades and innovations are also a tailwind for Trade Desk’s growth. The company recently launched Solimar —a new Koa AI-based trading platform with an upgraded user interface for better campaign management. The company’s expenditure on technology and development increased 78.2% year-over-year in its last reported quarter.

With global spending on digital ads projected to reach $455.3 billion by the end of this year, growing 20.4% year-over-year, Trade Desk is well-positioned to cash in on this opportunity. eMarketer, the research firm that made the projection, also expects worldwide digital ad spending to hit $645.8 billion by 2024.

Additionally, Trade Desk is an independent demand-side platform that doesn’t own any media content, unlike digital advertising heavyweights Google (GOOGL) and Facebook (FB). This makes Trade Desk unique and enhances its competitive position.

Recently, Susquehanna analyst Shyam Patil reiterated a Buy rating on the stock with a $105.00 price target. “We continue to view Trade Desk as a must-own multi-year growth story with several key growth drivers in play, notably CTV (particularly in the US and EMEA), shopper marketing, international, and Solimar,” explained Patil. (See Top Smart Score Stocks on TipRanks)

The company reported remarkable profitability in its second quarter of 2021, with adjusted EBITDA margin (operating profit as a percentage of revenues) surging to 42% from 10% in the prior-year quarter. What’s more interesting is that the company achieved such profitability while recording a 101% year-over-year growth in revenues.

This powerful combination of profitability and revenue growth has made Trade Desk a Wall Street darling, with a consensus rating of Strong Buy, based on 12 Buys and 4 Holds. The average Trade Desk price target of $91.21 indicates a downside potential of 29.6%.

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.

Disclosure: At the time of publication, Chandrima Sanyal did not have a position in any of the securities mentioned in this article.

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