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Benchmark downgraded The Trade Desk, Inc. (NASDAQ:TTD) to Sell with a $38 per share price target, stating the stock is priced to perfection in an imperfect market.
Benchmark analysts’ price target represents a potential 35% downside for TTD. They outlined four reasons for the downgrade, including untenable 2023 buy-side expectations, unhealthy non-CTV growth, data/signal loss risk over the next 18 months, and declining investor appetite for high multiples.
“Post CEO Jeff Green’s bullish 1Q and broadly 2023 outlook on the 4Q call, we believe buy-side expectations have re-rated to untenable levels while eclipsing overly optimistic consensus expectations,” the analysts wrote. “While CTV ad unit growth remains relatively healthy and on pace to support an estimated ~40% of TTD’s gross spend in the next 2 years, non-CTV growth (e.g., mobile and display) does not look healthy. Our recent industry checks suggest ’23E digital ad spend will be “flat-to-down 5%” (not factoring in a recession). We further believe buy-side ’23 CTV growth expectations are too high.”
They believe the data/signal loss risk over the next 18 months is due to “Apple decisioning on fingerprinting/Private Relay, and Google decisioning on GAID (Google Ad ID) and Chrome cookies.”
“We still firmly believe UID2 will provide little to no reprieve to future signal loss, with negative impact to TTD terminal value realized as we exit this year with still no large publisher UID2 commitments (to share in TTD auction) regardless of a growing list of UID2 ad tech vendor partners,” the analysts added. “As rates persist higher, we see a diminishing appetite for TTD shares.”
