Analyst Sentiments Mixed on Trade Desk: Solid Results but Concerns Over Valuation and UID2 Adoption Loom

Raymond James analyst Andrew Marok maintained a Market Perform rating on Trade Desk Inc TTD.

The Trade Desk reported 2Q results ahead of expectations, while its 3Q guide was slightly above expectations. While the adtech earnings cycle has been uneven in 2Q, TTD again rose above the fray to post solid results, gaining market share and consolidating its position in CTV. 

TTD again highlighted its progress in CTV and Retail Media, with CTV growing the fastest among scaled channels and spurring international growth. At the same time, Retail Media remains very promising in the early days.

Oppenheimer analyst Jason Helfstein maintained an Outperform and raised the price target from $80 to $95.

The re-rating reflects a slightly higher target multiple and slightly lower discount rate. The company is highly excited about improving advertiser sentiment, with early success in OpenPath displacing ineffective SSPs, allowing more efficient buying. 

CTV, Shopper Marketing, and UID 2.0 flywheel continue to drive spend. The 2Q beat reflects advertisers' increasing focus on full-funnel ROI. 

The 3Q revenue guide implies slight acceleration. With best-in-class DSP and exposure to the fastest-growing parts of digital advertising (CTV and retail media), valuation is probably investors' only genuine concern. 

Benchmark analyst Mark Zgutowicz maintained a Sell rating with a price target of $42.

He did not subscribe to Jeff Green's suggestion on the call that UID2 is a net benefactor in a zero-cookie world (2H24E), specifically regarding TTD's data graph and subsequent ROAS. 

The advertisers highly dependent on cookies for campaign targeting will naturally migrate to more inventory matching with publishers via an ID solution like UID2. 

But adopting UID2 does not mean TTD gets a net UID2 signal (to cover cookie loss), particularly at scale from large publishers not sharing their UID2 in TTD's open auction. 

Given the ongoing large pub/UID2 dynamic mentioned, he anticipates significant ROAS degradation.

While recent publicly-traded SSP outlooks were not as robust as TTD, his industry discussions would not suggest a share take from OpenPath, TTD's SSP solution. 

On the contrary, the mid-to-large publishers he spoke to are hesitant to give TTD more autonomy (view-in) of their CTV inventory/user data (than TTD already sees via the bid stream) and are content sticking with their existing (DSP-agnostic) SSP. 

KeyBanc analyst Justin Patterson reiterated an Overweight and $100 price target.

Near term, he believes a more modest 2Q beat and narrowing revenue growth premium vs. Meta Platforms Inc META (~23% Y/Y for 3Q23E vs. ~20% Y/Y for Meta) could create some tactical pressure in TTD shares. 

This is noise as connected TV and shopper marketing are secular growth drivers that make positive revisions into 2024E and beyond. The Trade Desk remains on track for accelerating revenue growth and margin expansion in 2024E.

Citigroup analyst Ygal Arounian maintained a Buy and raised the price target from $86 to $96.

While results were more in line with investors' expectations, he structurally sees strength at Trade Desk. Excluding political comps, guidance is +25% Y/Y, an acceleration from 2Q. 

While management noted it is seeing improvements in the macro, it is still a net drag, and the fundamentals are becoming more vital for Trade Desk. CTV continues to be the core growth driver, but management gave materially more air time to Retail Media this quarter, noting it can ultimately be more significant than CTV. 

With two of the most vital areas of digital ads as the core drivers, Trade Desk remains phenomenally well positioned. Continued product launches can drive further improvements in 2024. While multiples are rich, the long-term opportunity is significant for TTD.

RBC Capital analyst Matthew Hedberg reiterated an Outperform and a $100 price target.

The Trade Desk delivered a strong quarter in an increasingly uneven environment. 

While not the outperformance investors were looking for at the beginning of the week in light of optimism around the macro, the relative performance continues to reflect substantial market share gains. 

As such, management sets the stage for momentum into and through FY24, noting a "tidal wave" of opportunity.

Price Action: TTD shares traded lower by 4.63% at $77.18 on the last check Thursday.