The Trade Desk downgraded by Wedbush amid OpenAI partnership concerns

The Trade Desk (NASDAQ:TTD) was downgraded to ‘Underperform’ by Wedbush connected Thursday, with analysts citing concerns that the imaginable worth of a rumored concern with OpenAI (Unlisted:OPAI) has been overstated.

Shares traded astatine $29 connected Friday afternoon, supra the broker’s 12-month terms people of $23.

“TTD shares surged ~18% yesterday pursuing reports of a imaginable concern to monetize OpenAI’s ChatGPT inventory,” the analysts wrote.

“While we presumption this arsenic a captious semipermanent strategical determination against AI hunt cannibalization, the existent terms enactment overestimates near-term accretion portion ignoring the inevitable DSP dilution and disintermediation risks inherent successful partnering with a level of OpenAI's scale.”

Wedbush estimated that the incremental EBITDA from the imaginable concern would scope conscionable $42 cardinal successful 2027, implying a astir 53x aggregate connected the marketplace worth gained during the surge.

“Factoring successful our EBITDA expectations from the woody results successful a sustained 7x multiple,” the analysts wrote. “As such, we deliberation shares are present overpriced and we support our $23 terms people and valuation parameters.”

The analysts noted that portion the woody could trim the semipermanent menace of AI hunt cannibalization, the near-term fiscal interaction is expected to beryllium limited. Even nether assertive scenarios, Wedbush forecasts that The Trade Desk would seizure betwixt $31 cardinal and $77 cardinal successful gross successful 2026 and $56 cardinal to $140 cardinal successful 2027, representing conscionable 1% to 4% of the company’s projected gross base. “These figures neglect to warrant the existent double-digit surge successful valuation,” the analysts wrote.

Wedbush besides highlighted the imaginable for disintermediation arsenic OpenAI develops its ain advertizing capabilities. “We expect TTD’s stock of that walk to diminution implicit time,” the analysts wrote. “As OpenAI opens its inventory to a broader array of DSP partners to maximize yield, TTD’s triumph rates volition look earthy compression.”

Despite the cautious outlook, Wedbush acknowledged strategical positives successful the partnership, including entree to high-value intent information and reduced semipermanent hazard to TTD’s halfway business.

However, the analysts highlighted that nary woody has been signed. “Relying connected rumored interior projections for a pilot-phase merchandise carries important downside hazard if the concern fails to materialize,” they wrote.