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Tesla (NASDAQ: TTD) and The Trade Desk (NASDAQ: TSLA) have seen substantial share price increases over the past five years, with returns of 555% and 163%, respectively. Analysts remain optimistic about their future performance, suggesting further growth potential.
Leading analysts from Ark Invest, for instance, predict that Tesla’s stock could hit $2,600 per share by 2029, representing a possible upside of 630% from its current price of $356.
On a similar note, Matthew Cost from Morgan Stanley has established a bullish 12-month target of $200 for The Trade Desk’s stock, indicating a potential increase of 150% from its present value of $80.
Investors should consider several key factors regarding these two prominent stocks.
Tesla has managed to maintain its top position in the electric car market despite a reduction in its market share within the U.S. and China. The company’s performance in 2024, however, has been hampered by lower demand due to intensified competition and rising interest rates, which has negatively affected profitability amid ongoing price cuts aimed at attracting consumers. As a result, Tesla has reported disappointing financial outcomes.
In the most recent fourth quarter, Tesla’s total revenue rose by only 2% to $26 billion, with growth largely driven by its energy sector, contrasted by decreased automotive sales. Additionally, the operating margin declined by two percentage points, while the non-GAAP net income showed only a modest increase of 3%, reaching $0.73 per diluted share. Notably, the company experienced its first annual drop in vehicle deliveries since its inception.
Nevertheless, CEO Elon Musk shared encouraging developments during the fourth-quarter earnings call, announcing plans to launch autonomous ride-sharing (robotaxi) services in Austin by June, with intentions to expand to other U.S. cities later in the year. Musk expressed confidence in the company’s growing capabilities, suggesting that there would be unsupervised operational activity with the internal fleet across several cities by year-end.
Ark Invest’s forecast of $2,600 per share relies on ambitious expectations that Tesla’s total revenues will soar to $1.2 trillion by 2029, with robotaxi services anticipated to contribute about $750 billion of that total. This projection indicates a staggering annual revenue growth rate of 65% over the next four years, which raises concerns regarding its feasibility, especially with the ride-sharing market recently valued at under $50 billion.
Nonetheless, should demand for ride-sharing elevate significantly due to cost reductions from robotaxis, the market could expand greatly. Ark Invest predicts this market could reach $10 trillion by 2030, meaning that Tesla’s robotaxi revenues could touch $750 billion with merely 10% market penetration, albeit this scenario remains uncertain.
Current expectations from Wall Street predicted a 22% increase in Tesla’s adjusted earnings annually through 2026, which casts doubt on the stock’s evaluation at 147 times its adjusted earnings. For this valuation to appear justifiable, considerable acceleration in earnings growth is necessary, particularly as Tesla seeks to capitalize on its robotaxi and robotics ventures.
Investors skeptical about this trajectory might consider steering clear of the stock, while those convinced about Tesla’s potential to revolutionize the mobility sector may find it wise to hold a stake in the company. Though the prospect of a 630% return by 2029 seems bold, now could be a strategic moment for investment.
The Trade Desk, specializing in digital advertising, provides a demand-side platform (DSP) that aids ad agencies and brands in managing and optimizing data-driven campaigns across digital mediums. The company was an early adopter of artificial intelligence in its operations, and CEO Jeff Green maintains that it offers “the most advanced data-driven decision-making platform” in the market.
Despite competing against industry giants like Alphabet and Meta Platforms, The Trade Desk’s independence provides a significant edge. Unlike many competitors, it does not possess ad inventory, avoiding conflicts of interest. For instance, Alphabet has a vested interest in promoting its own advertising spaces available via Google Search and YouTube.
Furthermore, The Trade Desk’s cooperative relationship with publishers allows for a richer data-sharing environment, enhancing measurement capabilities unavailable on rival platforms. The company has partnered with numerous large retailers, granting it what Jeff Green describes as “the industry’s richest retail data environment.”
However, The Trade Desk encountered challenges in its fourth-quarter performance, falling short of revenue expectations for the first time in 33 quarters. Revenue grew by 22% to $741 million, which was below the anticipated $756 million, though non-GAAP earnings rose by 44% to $0.59 per diluted share.
Green attributed the revenue shortfall to “a series of small execution missteps,” elaborating on changes made to enhance operations, such as organizational restructuring to boost efficiency, direct engagement with brands, and adopting a more iterative approach to product development through frequent smaller updates instead of less frequent comprehensive releases.
Importantly, Morgan Stanley’s bullish estimate of $200 per share for The Trade Desk assumes a 29% annual revenue increase through 2027, a target that aligns with projections indicating significant growth in ad tech spending through 2030. Realistically, however, stakeholders may need to assign the company a significantly higher price-to-sales ratio to approach the $200 target, making it a potentially challenging feat.
Despite these hurdles, The Trade Desk remains an appealing prospect. The stock is currently trading at 44 times forward earnings, below its two-year average of 57 times forward earnings, presenting a buying opportunity for investors with a three to five-year investment horizon.
Source
finance.yahoo.com