Investing.com -- Wells Fargo on Monday started research coverage of The Trade Desk (NASDAQ:TTD) stock with a Buy rating and a price target of $150 ahead of the company’s Q3 earnings report next month.
In a note to clients, the investment bank outlined several factors contributing to the positive outlook, including Amazon (NASDAQ:AMZN)'s increased shift of advertising spend to Connected TV (CTV) and new partnerships that are expected to ramp up, as well as regulatory distractions faced by its rival Alphabet Inc Class A (NASDAQ:GOOGL).
More specifically, analysts believe that the introduction of advertisements on Amazon Prime Video has accelerated the growth of the CTV industry, which is advantageous for The Trade Desk, despite initial concerns from the buy-side about potential market share capture.
They note that industry checks indicate that publishers have responded to Amazon's move by increasing ad load by approximately 20% and reducing Cost Per Mille (CPMs).
“Increased scale of inventory + better pricing have accelerated shift from linear to CTV, more than offsetting any competitive impact to TTD,” analysts noted.
Looking ahead, Wells Fargo forecasts a significant benefit for The Trade Desk from unlocking inventory on Roku (NASDAQ:ROKU) and Netflix (NASDAQ:NFLX) in 2025 and 2026. The firm's revenue estimates are 6% and 8% ahead of the consensus for those years, respectively.
The anticipated integration with Netflix and Roku is expected to contribute approximately 400 basis points to The Trade Desk's gross spend growth in 2025, positioning the company's revenues ahead of consensus.
The firm also notes that The Trade Desk is likely to continue gaining market share from Google's DV360 in the medium term due to Alphabet's legal challenges.
“In our view, the biggest benefit from ad-tech legal challenges at Alphabet/Google is likely to be underinvestment & lack of focus, rather than pot'l business model or industry structure changes,” analysts continued.
Separately, Citi analysts said they expect “another strong beat and raise quarter” from TTD, noting that key growth drivers including CTV, Retail Media, and market share gains remain intact. Moreover, there is “additional upside potential from political spend."