We recently published a list of 11 Best AdTech Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where The Trade Desk, Inc. (NASDAQ:TTD) stands against the other best Adtech stocks to buy.
As per Dimension Market Research, the Global AdTech market size touched US$1,066.8 billion in 2023 and should reach US$3,528.4 billion by 2032. The market is expected to compound at ~14.2% from 2024 to 2032. Some of the critical trends include a strong emphasis on privacy-centric advertising, growth fueled by AI-driven personalization, and dominance of video and mobile advertising.
Key Trends Defining the AdTech Market
Artificial Intelligence and Machine Learning continue to drive sophisticated audience segmentation and personalized ad experiences. As per Geomotiv, a software development company, these technologies can quickly analyze vast amounts of data, predict user behavior, and tailor ads in real time. Collectively, these features help to improve engagement and conversion rates. The benefits of personalization and the opportunities provided should drive the demand for these solutions and the growth of AI-oriented AdTech companies.
Market experts believe that advertisers continue to target Programmatic advertising. This space continues to expand beyond traditional digital channels. Adnimation, a software company, highlighted that CTV ad spending is expected to grow to $42.4 billion by 2027 in the US. Publishers that have video content should prioritize CTV and find for best supply-side platform (SSP) to tap into a rapidly growing market.
Advertisers have been leveraging programmatic to reach the audiences with targeted ads. Furthermore, programmatic continues to make inroads into the audio format, such as podcasts and music streaming services. Next, AdTech SaaS companies have been providing customizable solutions, which enable advertisers to tailor the tools and features as per the specific needs. The popularity of these products continues to grow among advertisers and publishers.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
Blockchain and Influencer Marketing Should Drive Growth
As per Adnimation, data-driven influencer marketing is expected to dominate the broader AdTech market. Furthermore, the publishers and their AdTech counterparts continue collaborating with micro-influencers to fuel engagement and conversions. Blockchain technology should also be key in ensuring transparency in digital ad transactions. By decentralizing ad transactions, blockchain can help reduce ad fraud, improve trust between publishers and advertisers, and enable accurate tracking of ad performance. This will result in more reliable revenue streams. Adnimation also believes that, by 2025, video is expected to dominate digital ad formats, making up 82% of all internet traffic.
A large array of computer screens and tech equipment representing the technology company’s self-service cloud-based platform.
Our Methodology
To list the 11 Best AdTech Stocks to Buy According to Hedge Funds, we scanned through online rankings and AdTech-focused ETFs. After getting the initial list of 20-25 stocks, we shortlisted the ones having high hedge fund holdings. Finally, the shortlisted stocks were arranged in ascending order of their hedge fund sentiment, as of Q3 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
The Trade Desk, Inc. (NASDAQ:TTD)
Number of Hedge Fund Holders: 42
The Trade Desk, Inc. (NASDAQ:TTD) caters to the buy side of the digital advertising market. Its self-service platform enables ad buyers to create and manage digital advertising campaigns throughout all major channels.
The Trade Desk, Inc. (NASDAQ:TTD) continues to benefit from its exposure to the fast-growing digital advertising industry. Apart from the sectoral tailwind, the company has innovated itself through tools such as cookie-less tracking solution, Unified ID 2.0, and Kokai (AI-driven media-buying platform). The Trade Desk, Inc. (NASDAQ:TTD) has also entered into new digital media channels such as connected TV (CTV), or ad-driven streaming.
As per industry experts, Connected TV (CTV), a category including devices like Roku and Xbox, should act as one of The Trade Desk, Inc. (NASDAQ:TTD)’s biggest long-term opportunities as ad-based streaming services increase. The company’s software powers CTV advertising in more than 90 million US households (as of Q3 2024), and CTV is expected to be the fastest-growing part of its business. In Q3 2024, the company saw its revenue increase by 27% YoY to $628 million. This was largely driven by its CTV advertising growth.
The Trade Desk, Inc. (NASDAQ:TTD)’s strategic partnerships with some of the major streaming platforms should fuel growth in CTV advertising over the next quarter and in 2025. These alliances, such as with Disney, Netflix, and Spotify, offer the company privileged access to premium inventory and vast audiences. This should place The Trade Desk, Inc. (NASDAQ:TTD) at the forefront of the rapidly expanding CTV market.
With more and more viewers shifting from traditional linear TV to streaming services, advertisers are expected to follow suit. This should result in reallocating budgets to where audiences are most engaged. Rowan Street Capital, an investment management company, released a Q2 2024 investor letter. Here is what the fund said:
“We have owned The Trade Desk, Inc. (NASDAQ:TTD) for a little over 4 years now, opportunistically establishing a position in March of 2020 at a cost basis of $17.40 (split-adjusted). Since then, TTD has appreciated nearly sixfold, delivering an annualized return of approximately 55%. These are indeed remarkable results, but it’s important to recognize that this journey has been far from a smooth ride—much like many of our other investments. Since its public debut in 2017, the stock has experienced several significant drawdowns, with the most notable occurring in 2022 when it declined by over 60% (see below).
As we have previously discussed in relation to our investments in Meta and Spotify, one would have to be comfortable with sitting through these dramatic drawdowns and keeping their emotions in check in order to realize the long-term rewards of compounding that this company had delivered…” (Click here to read the full text)
Overall, TTD ranks 1st on our list of best AdTech stocks to buy according to hedge funds. While we acknowledge the potential of TTD as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than TTD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
