Commentary

Trading Desk Places

It always tickles me when Wall Street’s traders rate Madison Avenue’s. Today, the equity research team at Wall Street’s Raymond James & Associates initiated coverage of Madison Avenue’s aptly named The Trade Desk, giving it an “outperform” rating and a target price of $31.
That’s nearly twice what TTD priced its recent IPO at, and a significant bump over its trading range since going public in September.
All for good reasons -- both micro and macro economic ones -- Raymond James analyst Aaron Kessler states in his initial investment thesis for the programmatic media trading company: “Our positive fundamental thesis is based on: 1) large and growing programmatic advertising market; 2) strong technology highlighted by the expressiveness of the platform and robust data management platform; 3)  our expectation for 20% plus long-term revenue growth driven by increasing share of clients digital ad spend, expanding omnichannel capabilities, and international expansion; and 4) scalable software like model driving high margin expansion,” he writes.
On the macro side of the ledger, Kessler asserts there is a “large and growing programmatic opportunity,” noting, “Key drivers of programmatic advertising include: targeting at scale, forward ad markets shifting to programmatic, increasing complexity of digital advertising, cost efficiencies, and increasing use of data. According to Magna Global, the global programmatic advertising market (display/video) was $14 billion in 2015 and expected to reach $37 billion by 2019.”
In the micro side, he notes that TTD is a “differentiated ad tech company,” noting, “While the ad tech sector has seen numerous headwinds, we believe The Trade Desk is differentiated as: 1) it is a partner to ad agencies (not a disruptor); 2) it does not arbitrage, but instead sells a self-service software solution; 3) it is not a black box (its software is transparent); 4) it is omnichannel (vs. point solution); 5) it is a technology company (not sales heavy); and 6) header bidding is more of a positive for the company.”

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