Huge News for The Trade Desk Stock Investors | TTD Stock Deep Dive Part 4

SUMMARY

Parkev Tatevosian, CFA, analyzes The Trade Desk's evolving partnerships with major content providers and its positioning as competition intensifies from industry giants like Amazon. The discussion highlights new advertising inventory sources, the impact of large language models, and a valuation perspective for investors.

MAIN POINTS

• Disney emerges as a key partner for The Trade Desk, providing significant connected TV advertising inventory and emphasizing data-driven, relevant advertising. [0:10]
• The advertising landscape is described as ranging from high-quality, high-priced inventory like the Super Bowl to lower-quality, less targeted social media ads, with Netflix now contributing premium inventory. [1:15]
• Netflix's introduction of an ad-supported tier is expected to double its advertising revenue, benefiting The Trade Desk through increased access to premium ad inventory. [2:10]
• Large language models such as ChatGPT, Perplexity, and Gemini are identified as future sources of high-intent advertising inventory as they move toward consumer monetization. [3:05]
• The shift of search activity from Google to large language models is expanding the overall advertising market, creating new opportunities for The Trade Desk outside of Google Search. [4:05]
• The Trade Desk is considered undervalued at $22 per share compared to a calculated fair value of $51, reinforcing its status as a top investment pick. [5:10]

DETAILED ANALYSIS

The Trade Desk is strengthening its position in the digital advertising ecosystem through strategic partnerships with major content providers such as Disney and Netflix. Disney, with one of the largest connected TV ad businesses, has adopted programmatic advertising and maintains a close relationship with The Trade Desk, focusing on higher CPMs through improved data and more relevant, less wasteful ad placements. This partnership aligns with The Trade Desk's emphasis on premium advertising inventory, appealing to buyers seeking quality over quantity.

Netflix's recent entry into the ad-supported streaming market represents a significant shift, as the company previously relied solely on a subscription model. The introduction of a lower-priced, ad-supported tier is expected to double Netflix's advertising revenue, providing The Trade Desk with additional high-quality inventory. This move reflects a broader industry trend where premium content providers are increasingly open to programmatic advertising, expanding the available inventory for platforms like The Trade Desk.

Looking ahead, large language models such as ChatGPT, Perplexity, and Gemini are poised to become important sources of advertising inventory. Although these platforms currently focus on enterprise customers and operate at a loss, the expectation is that they will eventually monetize consumer usage through advertising. The specific and high-intent nature of user interactions with these models offers advertisers the opportunity to deliver highly targeted messages, potentially increasing the effectiveness and value of ad placements.

The ongoing migration of search activity from traditional engines like Google to large language models is reshaping the digital advertising landscape. As more consumers use these models for search, the total addressable market for advertising grows, even as Google's share diminishes. This trend benefits The Trade Desk, which lacks access to Google Search inventory, by opening up new, premium advertising opportunities.

Based on current market conditions and a calculated fair value of $51 per share, The Trade Desk is viewed as undervalued at its current price of $22, making it an attractive option for investors seeking growth in the evolving ad tech sector.

LINKS

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• Parkev Tatevosian's book on a six-step investing framework.
• Discounted access to Fiscal.ai, a primary data source for investment research.
• Subscribe to Parkev Tatevosian's free monthly newsletter on Substack.

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