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Stocks in The Trade Desk (NASDAQ:TTD) and Innovid (NYSE:CTV) are higher Tuesday, countering broader but modest declines in the advertising tech sector, alongside a preview from Morgan Stanley for earnings in the space.
There are three themes to look for in ad tech heading into the first-quarter results, analyst Matthew Cost and team pointed out: The mobile app ad ecosystem; cookie deprecation; and connected TV.
Mobile app ads are at an "uncertain juncture," with consumer spending on mobile games improving recently, but "we continue to believe that after 2 years of outperformance, in-game advertising growth will likely decelerate more in line with consumer spending over time," Cost wrote.
Meanwhile, deprecating cookies on Google's (GOOG) (GOOGL) Chrome browser is still set for later this year and that could spur "broad aftershocks" for ad-tech. The risks are likely limited, but it's time to monitor what the players say they will do in testing cookieless solutions, as well as any changing tone from them through the year as the move gets closer.
And CTV remains important and is expected to grow about 32% this year, Cost wrote. "As we approach 1Q earnings, we look for updates on ad budget shift as well as any accelerated shift to programmatic buying which some major publishers have highlighted intra-quarter," as well as more about any new tools to drive results.
Cost has detailed thoughts about the players as well. Morgan Stanley is still bullish on The Trade Desk (TTD) thanks to strong ad markets and tailwinds from the CTV shift; any potential volatility on Prime Video ads/cookies is "short-term" and likely to create buying opportunities. TTD is 1.5% higher Tuesday.
They're also Overweight on DoubleVerify (DV). But the firm downgraded Integral Ad Science (IAS) to Equal Weight, cutting that price target to $12 from $18. It also stayed Equal Weight on Unity (NYSE:U) -1.6% and AppLovin (NASDAQ:APP).
And Cost is Underweight on Yelp (YELP) -1.8%, expecting AI to set up structural challenges for the advertising business there.
Morgan Stanley boosted its price target on Innovid (CTV) to $2.10 from $1.60; CTV is 5.4% higher Tuesday. And it raised its target on AppLovin (APP) to $70 from $55; APP is +1.3%.