Is The Trade Desk signaling the rebound of digital advertising?

Key Points

• The Trade Desk beat Q4 2023 revenue estimates and raised its Q1 2024 revenue guidance.
• The Trade Desk’s Kokai AI platform is helping clients leverage data to power growth.
• BTIG Research reiterated its Buy rating and raised price targets to $98 from $91 on robust channel checks and strong advertiser demand.

The Trade Desk Inc. NASDAQ: TTD is a leading independent programmatic advertising technology (AdTech) platform provider. Its demand-side platform (DSP) allows companies to automate their digital ad buying with improved targeting and greater transparency. The Computer and Technology sector company utilizes distributed artificial technology (AI) and sophisticated machine learning (ML) algorithms to perform data analytics to help buy the right advertising at the right price to reach its best target audience at the best time. Its clients include Walmart Inc. NYSE: WMT, CNBC, Roku TV, AOL and Spotify Technology S.A. NYSE: SPOT.

The company competes with Alphabet Inc. NASDAQ: GOOGL owned Google Ads and smaller independent programmatic advertising platforms operated by Magnite Inc. NASDAQ: MGNI and Pubmatic Inc. NASDAQ: PUBM.

Kokai AI

The Trade Desk launched its AI-powered media buying platform Kokai in June 2023. It enhances programmatic advertising buying by providing an intuitive user experience (UX) with advanced measurement and collaborative innovation. Kokai distributes deep learning algorithms throughout the digital media buying sequence, accessing over 13 million advertising impressions per second. Each impression can contain thousands of distinct signals. Kokai can assist programmatic marketers beyond setting up campaigns like its Koa counterpart, which was launched in 2018.

Kokai distributes the power of Koa's AI through the media buying sequence on the Trade Desk platform. Even in the absence of identifiers, KPI scoring and budget optimization, Kokai can execute predictive clearing to ensure marketers make optimal bids, scoring each ad impression based on its relevance to the advertiser.

Beating low-balled estimates

On Feb. 15, 2024, The Trade Desk reported its Q4 2023 EPS of 41 cents, matching consensus analyst estimates. Revenues rose 23.4% YoY to $605.8 million, beating $502.81 consensus analyst estimates.

It's worth noting that The Trade Desk had lowered its Q4 2023 revenue guidance down to $580 million versus $610.4 million consensus analyst estimates in its Q3 2023 earnings report. This caused shares to drop 16%. They easily jumped over the lowered estimates this time around. The company also increased its stock buyback program to $700 million.

Raising guidance

The Trade Desk raised its Q1 2024 revenues of at least $478 million versus $451.45 million consensus analyst estimates.   

The Trade Desk CEO Jeff Green commented, “As we enter our busiest time of year and look ahead to 2024, we have never been in a better position to capture a greater share of the $1 trillion advertising TAM. With the generational shift to CTV, the growing opportunity in shopper marketing, our leadership in identity, and our most important product release ever with Kokai, we are better positioned than ever to help advertisers leverage data to drive growth and differentiate their brands."  

Analyst price target upgrade

BTIG Research reiterated its Buy rating and raised its price target to $98 from $91. Analyst Clark Lampen noted robust channel checks, and its December field work showed improved advertiser sentiment and stronger Q4 brand spending. Agencies expect that to continue into Q1 2024. Lampen sees more room for positive revisions. Amazon.com Inc. NASDAQ: AMZN Prime Ads and Google 3^rd party cookie deprecation effects are neutral to slightly positive for Trade Desk's business. Google's cookie deprecation will impact smaller-scale networks and publishers, potentially benefiting The Trade Desk.

The Trade Desk analyst ratings and price targets are at MarketBeat. The Trade Desk’s peers and competitor stocks can be found with the MarketBeat stock screener.

 Daily descending channel breakout

The daily candlestick chart on TTD illustrates a descending price channel breakout. The descending trendline commenced at $91.85 on July 31, 2023. The price channel continued to fall, hitting a low of $60.23 on its Q3 2024 earnings report, where it lowballed Q4 2023 revenue estimates. TTD recovered to the descending trendline at $77.92 on Dec. 20, 2023, only to reject and fall back to $61.48 on Jan. 14, 2024.

Shares floated back up through the upper trendline into Q4 2023 earnings and gapped higher on its release. The gap formed at $85.69 as shares surged to $94.00 before peaking. The daily relative strength index (RSI) spiked to the 80-band before peaking and falling back down towards the 60-band. Pullback support levels are at $80.02, $76.17, $69.72 and $64.77.