Financial Upstart Enters S&P 500 Ranking Thanks to a 3-Month Price Increase of 80%. Wall Street Deems it an Ongoing Buying Opportunity.
The Trade Desk, a US-based company that is not owned by one of the digital ad industry's giant walled gardens, is making significant strides in its plan to transition its entire customer base to the Kokai platform before the end of the year.
According to recent reports, about two-thirds of The Trade Desk's clients are already on the Kokai platform, with the bulk of spend running through it, indicating a successful transition for the company's biggest customers. This transition has been a key focus for The Trade Desk, as it looks to capture more of the market by offering ad placements around the web, in streaming video services, podcasts, and other digital media, regardless of who owns the content.
The push to transition customers to Kokai moved slowly, and management made major personnel changes to accelerate the shift in the fourth quarter. However, operational challenges in transitioning its customers to its new AI platform for buying digital advertising, called Kokai, led to a revenue miss for the quarter.
Despite this short-term setback, the long-term outlook for The Trade Desk is even better. With strong revenue growth and margin expansion, the current price of The Trade Desk's stock looks like a fair value. In fact, most Wall Street analysts expect The Trade Desk's stock to significantly rise, with a consensus "Buy" rating and an average price target of $92.5, implying a forecasted increase of about 67% over the next year. Analyst price targets range from $50 to $145.
UBS analysts have put a $105 price target on The Trade Desk's stock, implying upside of 29% from the current price. Many analysts still think there's room for The Trade Desk to recover from its current share price, which remains about 40% below its all-time high.
The market rewarded The Trade Desk's stock on its strong results, but the share price still remains below its all-time high. The Trade Desk's revenue miss for the fourth quarter was caused by operational challenges in transitioning its customers to Kokai. However, The Trade Desk is currently ahead of schedule on its plan to transition its entire customer base to Kokai before year-end.
In addition to its focus on Kokai, The Trade Desk is also looking to capture more of the market by bringing in new inventory at lower prices for marketers through its OpenPath service. The company is also starting to look at building its own inventory with its Ventura streaming TV operating system.
The inclusion of The Trade Desk in the S&P 500 is a result of Synopsys closing its acquisition of Ansys on July 17, leaving one fewer publicly traded stock in the index. This recognition by the S&P 500 underscores the growing importance of The Trade Desk in the ad industry.
Customers spent about $12 billion on The Trade Desk's platform last year, while the entire ad industry takes in $1 trillion of ad spending. The Trade Desk's unique position as an independent player in the digital ad industry gives it a significant advantage in capturing a larger share of the market.
Most of the analysts following The Trade Desk's stock still think it's heading higher from here. With a successful transition to Kokai and a focus on capturing more of the market, The Trade Desk looks poised for continued growth in the coming years.
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