The Trade Desk Wants Investors to Take a Ride On the Open Internet In its most recent earnings report The Trade Desk posted its fourth consecutive quarter of year-over-year (YOY) beats in earnings and revenue. However...
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Shares of The Trade Desk (NASDAQ: TTD) have been on a roller coaster after a stellar earnings report. However, TTD stock continues to establish higher levels of support. And the stock is within range of its 52-week high set at the end of December.
If analyst sentiment is any indication, that should be a relatively easy feat for the company to accomplish. Since The Trade Desk reported earnings on August 9, 2021, eight analysts have raised their price target for TTD stock. These upgrades ranged from $60 (from $40) to $105.
On one level, it's easy to understand why investors are flocking to TTD stock. The company is a leader in demand-side programmatic advertising. As the earnings report shows it has had four quarters of year-over-year (YOY) beats in earnings and revenue. However, the company's efforts to make the open internet the standard for digital advertising may be the catalyst that pushes the stock to an all-time high.
The Open Internet Versus the Walled Garden
Companies like Facebook (NASDAQ: FB), Alphabet (NASDAQ: GOOGL) and Amazon (NASDAQ: AMZN) have the benefit of a large audience. This has allowed them to take an approach to digital advertising that is termed the walled garden. Once customers are in their ecosystem, the companies can control and direct their access to Web content and services.
Why does the walled garden approach work? In the case of Facebook, marketers are guaranteed easy access to their target audience. Information on Facebook's platform is refreshed regularly and marketers get access to the vast amount of data that Facebook collects. And the story is similar for Alphabet via its Google search engine.
How effective is this approach? In 2019, Alphabet (Google) and Facebook combined for a 61% global market share in the United States. In Europe, that figure was even higher; by some estimates, the duopoly held approximately 80% of the digital advertising market share.
More importantly, the walled garden allows these companies to prevent access to other material. But under the premise that data wants to be free, The Trade Desk is trying to capitalize.
But as anyone that uses a computer knows, cookies have a way of sticking around on a device. And that has some privacy advocates looking for a world beyond cookies. For its part, Google is looking to launch its own "privacy sandbox" to replace third-party cookies.
However, this may be an example of users having to be careful of what they wish for. The Competition and Markets Authority (CMA) is investigating Google's approach as potentially being anti-competitive. That's because it would make the walls of its walled garden even higher than they are.
Data Wants to be Free
Essentially what The Trade Desk is banking on is that convenience and transparency matters more to users than privacy. After all, many people lament their lack of privacy … as a post on social media. You see what I mean? The Trade Desk is calculating that many advertisers will prefer the optionality of an open internet to the potential limitations of the walled garden.
The Trade Desk Has Strong Analyst Support
Although analyst sentiment isn't (nor should it be) the sole buying or selling indicator, it does carry some weight. In the case of TTD stock, there is bullish sentiment and conviction. Here's what I mean. Out of the 19 analysts that have issued a rating on The Trade Desk in the last 12 months, 15 give it a buy rating. The other four have it as a hold.
For a stock that's in what some would say is a volatile sector, that's not insignificant. While the consensus price target of these analysts suggests TTD stock only has about a 6% upside, there have been seven price target increases since the company's earnings report. Only one of those seven is for a price below its current price. And the remaining six are significantly higher.
Buy TTD Stock While It's Still On Sale
Prior to the current quarter, institutional investors have largely ignored The Trade Desk. That appears to be changing. The "smart money" has purchased over $9 billion in TTD stock this quarter, and after the strong earnings report that will likely move higher after Labor Day.
That makes now the time to take a position in TTD stock as it's likely to move past its 52-week high by the end of the year.