The Trade Desk (TTD), a media buying platform that connects advertisers to platforms, is enjoying something of a renaissance. Thanks to changing circumstances in video-on-demand platforms and a recent analyst upgrade, the company is making new headway in the market.
These developments give me all the fodder I need to be bullish. Meanwhile, the company’s gains in premarket trading today, which have somewhat held up throughout the day, help underscore that stance nicely.
The last 12 months for Trade Desk have been volatile, to say the least. A substantial run-up described May 2021 to mid-November 2021. Starting from there, however, a downward slide took most of the gains seen in the first half. Now, Trade Desk is trading around the same levels it was this time last year.
The latest news should help substantially. The company got an upgrade from Stifel Financial, going from Hold to Buy. Better yet, Stifel also hiked its price target from $50 per share to $80 per share.
The biggest reasons were connected to moves at Disney’s (DIS) Disney+ and Netflix (NFLX), which were poised to bring in ad-supported pricing tiers to open up more potential for subscribers.
Wall Street’s Take
Turning to Wall Street, Trade Desk has a Strong Buy consensus rating. That’s based on 12 Buys and two Holds assigned in the past three months. The average Trade Desk price target of $79 implies 50.8% upside potential.
Analyst price targets range from a low of $55 per share to a high of $108 per share.
Investor Sentiment Looks Bad, but Silver Linings Emerge
As glowing as the sentiment was from Stifel Financial, it’s far from echoed everywhere else. Right now, Trade Desk carries a Smart Score of 7 out of 10 on TipRanks. That’s the high end of neutral, suggesting a decent chance to outperform the market if things go well. However, most markers of investor sentiment are not looking for such an outcome at all.
Hedge funds, for example, have slashed their involvement with Trade Desk in the last few months. Based on the word from the TipRanks 13-F Tracker, hedge funds have again cut their TTD stock involvement between December 2021 and March 2022. There’s not much more room to cut, as hedge funds only owned just 30,204 shares as of the most recent quarter.
Meanwhile, insiders seem to be abandoning ship in rapid fashion. Insider trading for the last 12 months is heavily sell-weighted, featuring 47 sell transactions against just 16 buy transactions.
If there is a bright spot in the whole proceeding, it’s that in the last three months, buy transactions have led sell transactions by six to three. This does suggest something of a comeback in the making as far as the insiders are concerned.
Better still, there’s the fact that most of Trade Desk’s insider selling came when the stock was at its peak back in November 2021. That suggests little more than profit-taking in play.
As for retail investors that hold portfolios on TipRanks, they’re getting out, too, if at a slower rate. In the last 30 days, TipRanks portfolios holding Trade Desk stock dropped 1.6%. In the last seven days, that number dropped 0.6%. As for Trade Desk’s dividend history, like so many others, it’s just not there to discuss.
Changing Business Models Provide a New Edge
Things are looking up for Trade Desk. Certainly, getting Disney+’s business in an ad-supported tier is going to be a big step. Disney+ already has plenty of subscribers to its credit, and it has seen fairly steady growth over the last two years.
It stands to reason that, with inflation skyrocketing and a recession looking increasingly likely, a cheaper tier of service will help keep more of those customers in play. Such a tier doesn’t hurt Disney that much since it can profit from the advertising. Meanwhile, Trade Desk looks like a hero for setting up the deals.
Meanwhile, there’s the matter of Netflix. It’s already been hemorrhaging customers. The company lost 200,000 subscribers in the first quarter of 2022. It expects 10 times that loss in the second quarter. While Netflix has some serious issues with content availability, it’s making solid moves to fix them.
It may be losing the catalog titles of its past as its studios pull them in to augment their own offerings, but Netflix is working to replace them. Huge piles of original content are coming out of the service, and they’re only available on Netflix.
Better yet, the company is reconsidering the binge model and is instead going to staggered releases. Wedbush Securities calls that a smart move. So do I. Wedbush even upgraded Netflix from “neutral” to “outperform” mainly as a result of that move.
Still better, Netflix seems to be retracting its various political stances. Recently, the company released an update to its company culture guidelines.
In the update, Netflix noted that it “may not be the best place” for employees who will be required to work on content that opposes their own values. That’s going to bring more content into the fold in general and potentially bring back some of those lost subscribers.
Take all these factors together, and it suggests more business, and more reliable business, for Trade Desk. Best of all, the company is trading well off its highs. It’s just a couple of dollars more per share than it was this time last year. It’s already demonstrated that it can trade in the three-digit range, so that puts a little extra potential into this company.
Concluding Views
All told, there’s reason to be bullish here. Sure, the investor sentiment picture looks like a disaster except for recent turnarounds in insider trading. However, there’s a lot of new potential business rolling out, and that’s likely to be helpful.
Sure, Trade Desk will likely be hit by the same factors that will hit any advertising operation. Businesses will pull back on ad spending to keep the doors open until business improves. However, Trade Desk is also spreading its own work out, getting more clients in and thus insulating itself against some of those losses.
That response to less-than-optimal conditions ahead is worth considering. Any company that’s that forward-thinking could stand a second look for inclusion in a portfolio, and that’s why I’m bullish on Trade Desk’s chances, going forward.
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