Benchmark upgrades Trade Desk on growth compression concerns

Investing.com -- Benchmark upgraded Trade Desk Inc (NASDAQ:TTD) to "Hold" from "Sell," noting that the stock has retreated to within 10% of its discounted cash flow-based fair value of $59. The firm expects Trade Desk’s near-term stock performance to be influenced by the pace of its revenue growth reversion to broader U.S. digital ad industry trends.

Benchmark highlighted that Trade Desk’s premium growth over the digital ad market has declined from 4.0 times in 2022 to 1.6 times in 2024. However, its implied 2025 multiple of 2.1 times—based on consensus revenue estimates excluding political advertising—is moving in the wrong direction.

While GroupM projects 10.1% year-over-year growth in U.S. digital ad spending for 2025, Benchmark sees it as unlikely that Trade Desk can sustain a 1.6x premium without a revision in consensus expectations. If GroupM’s forecast holds, Trade Desk’s 2025 revenue growth estimate may need to come down by around 500 basis points to align with historical patterns.

The firm anticipates continued revenue growth compression in 2025, with its own forecast of 19.0% growth excluding political advertising trailing consensus by roughly 250 basis points.

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