Stifel boosts The Trade Desk to Buy on streaming ad upside
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Stifel has upgraded The Trade Desk (NASDAQ:TTD) to Buy, saying recent advertising moves by streaming services - notably Netflix (NFLX) - have the firm rethinking its stance on connected TV ads.
The firm is "buying into the CTV inflection point."
"Netflix with ads is a big deal (as is Disney+ (DIS) with ads), and it changes our view on the state of CTV advertising in the near-to-medium term," says analyst Mark Kelley. Looking at "reasonable" assumptions for Netflix ad spending, he estimates The Trade Desk could see an incremental $300 million in 2023 revenue - 14% better than current estimates - with a bull case of an incremental $950 million (45% upside).
Stifel had been cautious on TTD due to "too much investor optimism" around CTV advertising, which was lacking ads on major platforms like Netflix and Disney+. No more.
"In our view, this is a major change that will likely accelerate the already occurring shift of linear ad dollars to video/AVOD platforms," Kelley says.
The base case for gross ad spending (not revenue) on Netflix is $12 billion, with upside to $25 billion, he says. Based on that, he says to expect 14% upside to Trade Desk estimates with potential for 45% upside.
The lack of a sure timeline has Stifel leaving TTD estimates unchanged for now, but with a raised target price of $80, implying 54% upside.
Last week's earnings saw The Trade Desk falling back after second-quarter guidance was short of expectations.