What Happened?

Shares of advertising software maker The Trade Desk (NASDAQ:TTD) jumped 6.7% in the morning session after KeyBanc analyst Justin Patterson maintained a Buy rating and raised the price target to $142. Patterson expects The Trade Desk will continue to benefit from an improving advertising market, with expectations of better-than-expected fourth-quarter results when the company reports quarterly results on February 12, 2025 (later in the week). The main drivers behind this optimism seem to be the continued rise of connected TV (CTV), retail media, and audio, along with the OpenPath initiative. These factors are expected to help TTD achieve sustained annual revenue growth exceeding 20% and contribute to healthy margin expansion.

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What The Market Is Telling Us

The Trade Desk’s shares are somewhat volatile and have had 13 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business. 

The biggest move we wrote about over the last year was 12 months ago when the stock gained 19.9% on the news that the company reported fourth-quarter results and provided guidance for the next quarter, which blew past analysts' expectations for both revenue and adjusted EBITDA--a key profit measure. Its gross margin also improved during the quarter. Zooming out, the company is growing faster than the digital ad market, telling us that The Trade Desk is taking share. And the company is doing so profitably. Overall, this was a very impressive quarter that should delight shareholders. 

Additionally on the capital allocation side, The Trade Desk announced a new share repurchase program that brings the total authorization to $700 million. Repurchases totaled about $650 million in 2023, and this is an overall signal of the strength and dependability of the company's free cash flow.

The Trade Desk is up 5.4% since the beginning of the year, but at $124.10 per share, it is still trading 11% below its 52-week high of $139.51 from December 2024. Investors who bought $1,000 worth of The Trade Desk’s shares 5 years ago would now be looking at an investment worth $4,163.

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