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On Friday, Morgan Stanley (NYSE:MS) raised its price target on shares of The Trade Desk (NASDAQ:TTD) from $60.00 to $80.00, while maintaining an Overweight rating on the stock. Currently trading at $59.90, the company maintains strong financial health with an impressive gross profit margin of 80% and holds more cash than debt on its balance sheet. According to InvestingPro analysis, The Trade Desk is currently trading slightly below its Fair Value. The adjustment follows The Trade Desk’s first-quarter performance, which indicated a rebound from the previous quarter’s shortfall. Analysts at Morgan Stanley believe that the earlier miss was likely due to temporary factors, rather than structural challenges within the company.
The Trade Desk’s first-quarter earnings beat expectations and provided a positive outlook for the second quarter, forecasting a 17% year-over-year revenue growth. This guidance comes despite observed spending weaknesses in specific brand budgets, including consumer packaged goods (CPG) and automotive sectors. The company’s robust financial position is reflected in its current ratio of 1.81, indicating strong liquidity. InvestingPro data reveals 16 additional key insights about The Trade Desk’s financial health and growth potential, available in the comprehensive Pro Research Report. Morgan Stanley’s analysts were encouraged by the company’s projections, suggesting that market expectations have been reset to more realistic levels.
The firm’s optimism is further bolstered by the company’s product initiatives, which appear to be yielding results and are expected to drive earnings revisions for The Trade Desk throughout 2025. In light of these factors, Morgan Stanley has increased its EBITDA estimates for The Trade Desk for the years 2025 and 2026 by 10% and 6%, respectively. The company’s current EBITDA stands at $527 million, with a notable revenue growth of 25% over the last twelve months.
The new price target of $80.00 is based on a target multiple of approximately 28 times the company’s projected 2026 EBITDA. This valuation reflects a roughly 22% discount compared to a regression of The Trade Desk’s software peers, which Morgan Stanley justifies due to the company’s limited visibility caused by macroeconomic factors and the non-recurring nature of spending on its platform. Despite these concerns, the firm notes The Trade Desk’s consistent performance in delivering results for advertisers, its unique position as the only scaled independent demand-side platform (DSP), and its leadership in the crucial connected TV (CTV) category. The stock has shown recent momentum with a 10.7% return over the past week, though it remains significantly below its 52-week high of $141.53.
In other recent news, The Trade Desk’s first-quarter performance has drawn significant attention. The company reported a 25% year-over-year increase in revenue, reaching approximately $616 million, which exceeded analyst expectations by 7%. The Trade Desk’s adjusted EBITDA also impressed, coming in 41% above Street forecasts at about $208 million. Analysts from Stifel, Citi, and William Blair have maintained positive ratings, with Citi raising the stock price target to $82, highlighting the strong adoption of the Kokai platform as a pivotal factor in the company’s success. MoffettNathanson, however, maintained a Neutral rating, raising their price target to $75, while expressing concerns about The Trade Desk’s future operating leverage and potential competition from Amazon (NASDAQ:AMZN).
Evercore ISI reiterated an In Line rating with a $90 price target, acknowledging the company’s strong performance but noting that it may take time to rebuild its track record. The Trade Desk’s guidance for the second quarter projects revenue of $682 million and an EBITDA of $259 million, aligning with consensus estimates. The company’s recent organizational changes, including the hiring of a new COO and strategic upgrades, have been well-received, contributing to its robust market positioning. Despite macroeconomic pressures, The Trade Desk’s continued focus on product innovation and brand relationships has bolstered analyst confidence in its near-term prospects.
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