Should You Buy Trade Desk Stock Now Amid OpenAI Ad Talks?

Since its $90 August peak, shares of Trade Desk (TTD) are showing signs of life again. Granted, the stock dropped with slowing revenue growth, increased competition, and weak guidance. Another threat is artificial intelligence (AI), with Trade Desk competing with Alphabet (GOOG) (GOOGL) and (META)-owned Instagram to win advertising spend.

First, OpenAI is reportedly in talks with The Trade Desk about a partnership that could help scale advertising on ChatGPT. If a deal materializes, it could become easier for marketers to buy ChatGPT ads, as noted by eMarketer.com, “turning the platform into a true ad channel rather than an experiment.” They added, “By tying into existing ad pipes, ChatGPT could start competing for the same dollars that currently go to social and search.”

Next, CEO/Founder/Chairman Jeff Green put his money where his mouth is, buying $150 million worth of TTD stock. And while the massive buy doesn’t eliminate the risks, it does tell us the one person with the clearest view is bullish. Sure, AI systems are taking over human workflows in the industry. However, as automating agents grow bigger, they will still need neutral platforms that can be trusted for reliable data, which is what Green is betting on with Trade Desk.

In fact, as noted by Green on The Current:

“Let me go a click deeper on why I’m so convinced that future is bright: TTD has been building AI and machine learning tools for more than a decade, long before the recent AI hype phase. AI is across our platform — supercharging our bidder, our valuation engine, our SPO efforts, our predictive clearing product, our new Deal Desk. Kokai is able to analyze 20 million ad opportunities every second, each with thousands of variables, all in the context of first- and third-party data, in milliseconds, and find the right impression for any given advertiser. This is because we believe we have the industry’s most advanced AI and the industry’s richest, most refined, objective, and trusted data platform.”

Analysts at Wedbush downgraded shares of Trade Desk to underperform with a price target of $23 a share. They argue that investors are getting too bullish about the potential OpenAI deal. They also note that talks are still in the early stages and such a deal would not generate immediate revenue for the companies. While true, Green’s purchase of $150 million worth of stock, which is off the charts, is a bullish indicator. Plus, an insider wouldn’t put up that kind of money if they thought the stock was a dud. Plus, the company just authorized a $500 million stock buyback program, which sends a clear message of management bullishness.

Of the 39 analysts covering TTD stock, 16 analysts rate the stock as a “Strong Buy,” two rate it as a “Moderate Buy,” 17 rate it as a “Hold,” one rates it as a “Moderate Sell,” and three rate it as a “Strong Sell.” Presently, the mean target price among analysts is $33.30, which implies 21.4% potential upside. The high-end target of $70 implies 155.2% possible growth from here.  While Trade Desk still faces risks such as slow growth, fierce competition from tech giants, and uncertainty around emerging AI-driven advertising models, the company also has strong catalysts ahead of it. That includes a potential OpenAI partnership.

Add in the newly authorized $500 million buyback, the CEO’s $150 million stock purchase, and there are substantial reasons to get bullish. From here, Trade Desk could be a powerful way to gain exposure to the future of AI-powered advertising.

On the date of publication, Ian Cooper did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com