On Thursday, The Trade Desk (NASDAQ:TTD), a provider of a global technology platform for buyers of advertising, received an upgrade in its stock rating by Jefferies, a global investment banking firm. The rating was lifted from Hold to Buy, accompanied by an increase in the price target from $95.00 to $105.00.
The upgrade is attributed to the anticipation of a significant uptick in programmatic Connected TV (CTV) advertising. Jefferies' analysis suggests The Trade Desk is poised to capitalize on this surge, leading the firm to revise its revenue estimates for fiscal years 2024 and 2025. These new projections place Jefferies' forecasts 3% and 8% above the consensus, respectively.
The revision of estimates comes on the heels of intra-quarter checks and recent developments involving Disney, which hint at a favorable environment for The Trade Desk's growth. The firm's analysts believe that current street estimates, which do not predict an acceleration in growth compared to 2023, are conservative. They argue that factors such as the upcoming U.S. political elections and an increase in available programmatic CTV inventory will serve as significant tailwinds for the company.
Despite concerns over the stock's valuation, which trades at 38 times the projected FY25 EBITDA, Jefferies maintains a positive outlook. The investment firm's conviction is based on a long-term projection that sees The Trade Desk's stock reaching $105 per share.
This target is justified by a valuation of 26 times the estimated $2.5 billion FY28 EBITDA, reflecting a 24% five-year revenue Compound Annual Growth Rate (CAGR) at a 45% margin, discounted back to FY25.
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