3 Reasons Needham Upgraded Trade Desk

The bullish case for Trade Desk Inc TTD, a provider of a technology platform for buyers of advertising, can be made for three reasons, according to Needham.

The Analyst

Needham analyst Laura Martin upgraded Trade Desk from Hold to Buy with a new $325 price target.

The Thesis

Trade Desk stands to benefit from three company and industry-wide catalysts, Martin wrote in the note.

First, Trade Desk offers investors direct exposure to ad spending growth as third-party data points to 84% of marketers planning to increase their investment spending in online video in 2020. Another 70% of marketers expect to increase their spend on social media networks and 63% expect to spend more advertising on podcasts.

Second, the value of each individual ad is rising, the analyst wrote. According to a GroupM whitepaper, total U.S. ad spending will increase by $20 billion in 2020 and total U.S. ad spending will total $240 billion. At the same time ad impressions will likely fall by 10% in 2020 which by default improves pricing power in 2020. Trade Desk is the largest buyer of ad units and takes a 20% revenue share of ad dollars spent on its platform.

Finally, Trade Desk could take advantage of "distracted" senior executives at social media companies who will be forced to pay more attention on regulatory and legislative pressures. The research firm estimates Trade Desk will end 2020 with $843 million of revenue on total ad spend of around $4.2 billion.

Price Action

Shares of Trade Desk trading up 3.03% at $247.62 at time of publication Friday.