Observed Signal · May 21, 2024 · Technical Release · Source: Quo Vadis News · Impact: 3/5 · Sentiment: Neutral
Valuing The Trade Desk: Two Sides of a Coin
Quo Vadis analyzes The Trade Desk valuation through a dual-framework lens: a traditional discounted cash flow model and a speculative, event-driven scenario. The piece notes TTD’s approximate $46B market cap and roughly $95/share price, contrasting this with a model that may justify lower or higher values depending on future cash flows. It details adjustments by capitalizing all R&D expenses (Damodaran approach), which elevates FY23 EBIT margins from 10.3% to 22.9% and adds $246M in capitalized R&D, increasing invested capital from $1.1B to $2.0B. The analysis cites FY23 NOPAT of about $357M and a purified free cash flow of $17.4M, alongside 1Q24 revenue growth of 28.3% YoY and FY23 growth of 23.3%. It presents a base valuation around $11/share and a speculative “Huge” scenario near $95/share, notes Jeff Green as TTD’s CEO, and references Netflix’s ad-tech developments as a signal of a potential future event benefiting the company. A simplified model is available to subscribers.
In-depth valuation analysis of a major adtech company with finance-focused insights.
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Key Takeaways & Evidence Grounding
- TTD market cap around $46B and price near $95 per share.
- TTD 1Q24 revenue growth 28.3% YoY; FY23 revenue growth 23.3%.
- Capitalized R&D adds $246M to FY23 EBIT, raising margins from 10.3% to 22.9%.
- Invested capital increased from $1.1B to $2.0B (up $893M) due to capitalized R&D.
- Base valuation ~ $11 per share; 'Huge' scenario ~ $95 per share.
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