Tuesday, Needham maintained a Buy rating on The Trade Desk (NASDAQ:TTD) stock and raised its price target to $125 from $115. The adjustment reflects the firm's updated investment thesis for The Trade Desk, including a positive outlook on the company's new business ventures. According to Needham, the company's recent business wins and the introduction of fiscal year 2026 estimates contribute to the raised target.
Needham's analysis indicates that approximately 10% of The Trade Desk's workforce as of June 30, 2024, is dedicated to new business areas that currently do not generate revenue. However, given The Trade Desk's successful history in developing new business segments, Needham suggests that the associated costs of these employees should be factored back into the calculations for "normalized" EBITDA and profit margins.
The firm has decided to maintain its fiscal year 2024 and 2025 estimates for The Trade Desk, implying confidence in the company's existing projections. The strategic focus on new businesses is expected to bolster The Trade Desk's future financial performance, justifying the enhanced price target.
The Trade Desk, which specializes in providing a technology platform for ad buyers, is poised to benefit from its expansion into new business areas. By investing in these sectors, the company aims to diversify its revenue streams and strengthen its market position.
Needham's revised price target of $125 represents an optimistic stance on The Trade Desk's growth trajectory, backed by the company's consistent track record and strategic investments in its workforce and new business initiatives.
InvestingPro Insights
The Trade Desk's (NASDAQ:TTD) strong market position and growth potential, as highlighted by Needham's analysis, are further supported by recent financial data and insights from InvestingPro. The company's revenue growth of 25.53% over the last twelve months aligns with Needham's positive outlook on TTD's business expansion. Additionally, TTD's impressive gross profit margin of 81.23% underscores its operational efficiency, which is crucial for sustaining growth in new business ventures.
InvestingPro Tips reveal that The Trade Desk "holds more cash than debt on its balance sheet" and has "liquid assets exceed[ing] short term obligations," indicating a solid financial foundation to support its investment in new business areas. This financial stability is particularly relevant to Needham's focus on TTD's allocation of workforce resources to non-revenue generating segments, as it suggests the company has the capacity to invest in future growth without compromising its current financial health.
It's worth noting that TTD is "trading near 52-week high" and has shown a "large price uptick over the last six months," with a 25.59% price return in that period. This market performance aligns with Needham's bullish stance and increased price target. Investors seeking more comprehensive analysis can access 16 additional InvestingPro Tips for The Trade Desk, offering deeper insights into the company's valuation and growth prospects.
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