Snap, Trade Desk slide as Jefferies hits sidelines in digital ad look
Artur

Snap (NYSE:SNAP) and The Trade Desk (NASDAQ:TTD) are outpacing broader market declines, down 9.1% and 7.2% respectively after a Jefferies coverage update reduced ratings on both stocks to Hold.
Taking over, analyst James Heaney takes a more cautious view on digital advertising than the rest of Wall Street, expecting 4% revenue growth on average for fiscal 2023 (vs. consensus for 14%).
That's the result of backing off its revenue estimates by 3-7% overall, with Heaney citing the fact that global ad spend and gross domestic product are highly correlated - and Jefferies economists are expecting a recession to hit in the third quarter of 2023.
The firm expects "another round" of estimate cuts in the fourth quarter as more negative Q1 and 2023 guidance rolls in, though heavy declines have cut multiples enough that there's some downside protection.
In the case of The Trade Desk (TTD) - "one of the best ways to play the shift of ad dollars to [connected TV] from linear TV" - its "best-in-class" fundamentals are offset by a rich valuation, highest in its peer group and already pricing in industry tailwinds. There's still upside if the CTV shift offsets expected ad budget cuts.
As for Snap (SNAP), the social-media name faces several headwinds (including the iOS 14.5 privacy changes, a worsening macro picture, and intense competition) with a lack of company-specific catalysts, Heaney said.
He's more positive on Integral Ad Science (NASDAQ:IAS), which Jefferies keeps at a Buy, due largely to a 50% valuation discount to its closest peer, DoubleVerify (DV) - which is seeing faster revenue growth, but Heaney argues IAS can narrow that gap through upselling premium-priced Context Control, and launching new products for Facebook News Feed and Netflix.
Heaney maintains a Hold on PubMatic (NASDAQ:PUBM), given a "relatively high" exposure to display advertising, which leads Jefferies to model no growth for fiscal 2023.