KeyBanc raises The Trade Desk stock target to $80, keeps Overweight

On Friday, KeyBanc Capital Markets adjusted their outlook on The Trade Desk (NASDAQ:TTD) shares, citing improved performance and adoption of the company’s Kokai technology. Analyst Justin Patterson increased the price target to $80 from the previous $67 while maintaining an Overweight rating on the stock. According to InvestingPro data, TTD has demonstrated strong financial health with a robust balance sheet, maintaining more cash than debt, while delivering a 25% year-over-year revenue growth.

Patterson’s assessment came after The Trade Desk reported first-quarter earnings that exceeded expectations, contrasting with a weaker fourth-quarter performance which the analyst considered an anomaly. The Trade Desk’s recent success has been partly attributed to the adoption of its Kokai technology, which is now utilized by approximately two-thirds of its clients. The company’s strong execution is reflected in its impressive 80% gross profit margin and solid return on invested capital of 12%, as reported by InvestingPro.

According to Patterson, Kokai technology has been instrumental in delivering stronger Return on Ad Spend (ROAS) and enabling advertisers to reach new audiences beyond those accessible through traditional "walled garden" campaigns. Despite current macroeconomic concerns, Patterson believes that The Trade Desk’s robust execution positions the company to return to a 20% growth trajectory as the economic climate improves. This outlook aligns with the company’s current revenue growth forecast of 17% for FY2025, though InvestingPro analysis indicates the stock is currently trading above its Fair Value.

The analyst’s optimism is reflected in the revised price target, which is based on a 28x multiple of the company’s projected 2026 enterprise value to EBITDA (earnings before interest, taxes, depreciation, and amortization). This valuation suggests confidence in The Trade Desk’s long-term financial prospects and its ability to sustain growth in the dynamic digital advertising market.

The Trade Desk’s focus on enhancing advertiser performance through technological innovation like Kokai appears to align with the broader industry trend of seeking more efficient and effective advertising solutions. As the company continues to execute on its growth strategy, KeyBanc’s updated analysis underscores the potential for The Trade Desk to capitalize on market opportunities and navigate near-term economic uncertainties.

In other recent news, The Trade Desk has reported impressive first-quarter earnings, with a 25% year-over-year revenue increase to $616 million, surpassing several analysts’ expectations. BofA Securities noted that adjusted EBITDA rose to $208 million, significantly higher than anticipated, and highlighted the company’s strategic changes post-fourth-quarter challenges. UBS maintained a Buy rating with an $80 target, citing improved revenue growth estimates for FY25 and an increased projection for EBITDA margins. Jefferies raised its price target to $82, reflecting confidence in The Trade Desk’s continued growth, with a revised revenue estimate for FY25. Susquehanna reaffirmed a positive stance with a $135 target, emphasizing the company’s strong performance and strategic product enhancements. BMO Capital Markets also maintained an Outperform rating, with a $115 target, noting a 7% revenue increase and a 40% rise in adjusted EBITDA above consensus. Analysts across the board have acknowledged the successful adoption of The Trade Desk’s Kokai platform, a key driver in reducing costs and increasing customer transition. Despite potential macroeconomic headwinds, The Trade Desk’s guidance for the second quarter suggests robust growth, with projected revenue of at least $682 million.

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