We're Boosting Our Price Target for This Holding After the Latest From Netflix

We are boosting our price target to $155 from $140 for Trade Desk TTD shares.
We are also upgrading TTD shares to a One rating from Two, and intend to pick up additional shares for the Portfolio near the market open.
As the shares move higher, we will revisit our $115 panic point as needed.

Last night, Netflix NFLX delivered a beat-and-raise December quarter earnings report fueled by much stronger than expected subscription growth and news it would soon be increasing prices yet again. During the three months, the company added an eye-popping 18.91 million paid net additions to its subscriber base, which exited 2024 at 301.6 million. As we discussed on Tuesday, we pay close attention to these figures from Netflix because of its foray into advertising-supported membership and our position in Trade Desk.

Contained in Netflix’s quarterly letter to shareholders, the management team revealed that the ad-supported membership tier accounted for over 55% of sign-ups in regions where Netflix offers that option. It also shared that the number of its ad plans grew 30% sequentially, which tells us it is serving up considerably more ads. Moreover, that 30% sequential growth follows 35% growth in the September quarter and significant growth in the ones before that.

We’re not surprised by this given the rising price tag of streaming services and the ongoing shift to streaming platforms from traditional TV. Time and time again, we’ve seen advertisers shift where they spend their ad dollars to where consumers are, and in this case that increasingly means CTV, hence our bullish stance on Trade Desk and its shares.

Adding to that bullish stance, Netflix shared that it doubled its ad revenue in 2024 and aims to double it again in 2025 with further inroads expected as it targets the $25 billion in connected TV (CTV) ad spend. To that end, Netflix also announced the introduction of Extra Member with Ads offering in 10 countries.

Over the last several quarters, when we see a few streaming platforms boost subscription prices, others tend to follow. As the overall basket of streaming prices rises, we expect the shift to ad-supported tiers will accelerate across these platforms, just like we are seeing at Netflix. With that in mind, we are lifting our Trade Desk price target to $155 and upgrading TTD shares to a One rating from Two.

Potential catalysts on the horizon include quarterly results from other streaming platforms, including Amazon’s AMZN Prime Video; Alphabet’s GOOGL YouTube and YouTube TV; Disney’s DIS Disney+, Hulu and ESPN+; Paramount Global’s’ PARA Paramount+; and Comcast’s CMCSA Peacock.

While we could see a bump in TTD shares on Wednesday following Netflix’s comments, our thought is the road to our revised price target will play out over several quarters and require confirmation for the market that ad dollars are shifting to streaming platforms. We’re inclined to be patient.

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At the time of publication, TheStreet Pro Portfolio was long TTD, AMZN and GOOGL.