Trade Desk (TTD) shares dropped 12% in a single day after investors reacted unfavorably to the new advertising partnership between Netflix and Amazon. To add to the situation, Matthew, an analyst from Morgan Stanley, downgraded TTD’s stock rating, slashing its price target from $80 to $50. This downgrade comes in what has already been a tough year for TTD, with its stock down about 60% since January.
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For some context, Trade Desk runs a demand-side platform that enables advertisers to purchase and manage digital ads across various formats like video, display, and connected television. The recent deal between Netflix and Amazon allows advertisers to buy ad space on Netflix through Amazon’s platform, which puts them in direct competition with Trade Desk.
Morgan Stanley’s Perspective on Trade Desk
The recent changes have led Morgan Stanley to reevaluate Trade Desk’s valuation and to express concerns about both connected television and digital advertising sectors. The analyst pointed out that core trends in connected TV indicate “growing challenges” heading into 2025. Morgan Stanley acknowledged that it had initially overestimated Trade Desk’s growth potential and cited ongoing execution issues, a sluggish open web advertising market, and increasing competition in connected TV.
Moreover, Morgan Stanley’s research revealed that Trade Desk has significantly raised fees compared to rival platforms, which is causing friction with clients. At the same time, Amazon’s advertising service is gaining ground and poses a serious challenge to Trade Desk’s market position.
While Morgan Stanley doesn’t see a complete collapse, there’s a warning of potential further downgrades if conditions don’t improve. However, the analyst also mentioned that with stocks already dropped drastically and expectations low, the downside may be limited. They will be closely monitoring performance in the next quarter for any signs of improvement.
Is Trade Desk a Good Investment?
Despite the current turmoil, Trade Desk’s stock maintains a positive consensus among 28 Wall Street analysts. This consensus consists of 14 buy ratings, 12 holds, and 2 sell recommendations over the last three months. The average price target for TTD stands at $72.63, indicating a potential rise of 57.4% from its current valuation.
