Morgan Stanley sees Trade Desk's upside - and a premium valuation
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The Trade Desk (NASDAQ:TTD) is the "MVP" of Connected TV, Morgan Stanley says, with promising days ahead - but it's starting coverage of the stock at Equal Weight, waiting for a better spot to get in.
The company is "the leading independent demand side platform across display, audio, mobile Web, and particularly CTV, where it has established a key leadership position," analyst Matthew Cost says.
Offering advertisers a neutral platform to combine proprietary data with third-party targeting has been especially effective in the $13.7B (and growing) CTV market, Cost notes, as TTD already has an 18% market share in CTV (and 10% across CTV/video).
Meanwhile, the launch of new ad-supported products from Netflix and Disney should help drive significant growth in CTV, and "TTD is positioned as the go-to intermediary for advertisers to access this new inventory programmatically."
The company should grow market share - gross billings growing at a 28% compound annual rate through 2024, and about 36% annually for CTV including video - and The Trade Desk is diversified, as Cost expects its business evenly split between CTV and other channels by 2026 even with heavy CTV share growth.
It should also maintain strong customer retention that it's been reflecting - more than 95% over the past six years, Cost says.
But current valuation is fair, with the market valuing the shares at 27 times Morgan Stanley's expected 2024 EBITDA for TTD, and 11 times 2024 sales.
It has a $60 price target based on a target multiple of 30x enterprise value-to-2024 EBITDA, implying 6% upside (TTD stock is up 3.5% Tuesday).