Trade Desk-Publicis Dispute: Analyst Says TTD Selloff Overdone, Revenue Impact Seen Less Than Feared

• Trade Desk's billings exposure to Publicis is in the low double-digit percentage range, but its revenue exposure is lower, and a substantial portion is covered by joint business plans - Evercore ISI
• TTD stock has fallen by over 14% since the Publicis issue came to light earlier this week, prompting at least two analyst downgrades.
• Retail sentiment on Stocktwits for TTD has held up in the ‘bullish’ zone.

A sharp selloff in shares of The Trade Desk, triggered by a fallout with major ad agency partner Publicis Groupe, appears overdone relative to the potential financial impact, a leading analyst said.

Evercore ISI said that while the development is a “clear headwind,” Trade Desk's billings exposure to Publicis is likely in the low double-digit percentage range, its revenue exposure is lower, and a substantial portion is covered by joint business plans, which "should be relatively secure."

The research firm lowered its price target on the company’s shares by $3 to $32, while maintaining an ‘Outperform’ rating. The new target implies a 36% upside to the stock’s last close.

TTD Stock Pressure After Publicis Dispute

Publicis, one of the largest ad buyers globally, said earlier this week that it would no longer recommend the Trade Desk platform to its clients after its “audit” revealed inflated billings. 

That triggered a 7.4% drop in TTD shares on Tuesday, which has continued to drop and is now down 14.5% since Publicis’ claims were first reported.

Trade Desk has pushed back against the agency’s claims and request for additional data on how Trade Desk bills clients, arguing confidentiality issues. “We will not disclose the bills of all of our clients and partners to one of them simply because they assert ambiguous audit rights,” CEO Jeff Green said in a LinkedIn post.

This week’s selloff in Trade Desk nearly wiped out the prior week’s gains, when Green’s massive $148-million stock purchase had buoyed investor sentiment.

Two Analysts Downgrade TTD, Retail View Holds Up

Meanwhile, at least two brokerages – Rosenblatt and Stifel – have downgraded TTD shares to the equivalent of ‘Hold.’ 

Pressures on the agency sector, sparking revenue deceleration, declines and consolidation in that sector, could be pushing agencies to take a more confrontational approach with Trade Desk, Rosenblatt said. 

To be sure, AdWeek had reported last month that Dentsu and WPP had pulled back from Trade Desk’s OpenPath initiative over hidden fees and a lack of transparency. 

Stifel said that Trade Desk remains the gold standard for digital ad buyers and expects a resolution with Publicis but sees no clear near-term catalyst to improve investor sentiment. It lowered its TTD stock target to $26 from $48.

Currently, 17 of 38 recommend ‘Buy’ or higher for the shares, 18 recommend ‘Hold,’ and three recommend ‘Sell’ or lower, per Koyfin data. Their average price target of $31.15 implies a 35% upside from the stock’s last close.

On Stocktwits, the retail sentiment has held up in the ‘bullish’ territory since the Publicis issue came to the fore.

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