Shares of The Trade Desk (NASDAQ:TTD) soared 112% over the last 12 months, and some investors may believe they've missed out on the chance to profit from the fast-growing digital-advertising company's stock. But Needham thinks there's plenty of upside ahead -- so much so that the firm is calling The Trade Desk its "top stock pick for 2020."

There are numerous catalysts for The Trade Desk, argued Needham analyst Laura Martin in a note to investors on Thursday. Shares will benefit from an estimated $10 billion in political ad spend in the U.S. in 2020; ad-unit pricing favorability thanks to high demand relative to supply; and The Trade Desk's strong positioning as the go-to platform for buying digital ads across the open internet (online advertising outside of "walled gardens" like Facebook, Alphabet, and Amazon), and other drivers.

Here's a closer look at Needham's bullish view for The Trade Desk.

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Image source: Getty Images.

Better value than Roku stock

Perhaps the most notable takeaway from Martin's analysis was her comparison of The Trade Desk's and Roku's (NASDAQ:ROKU) valuations. While Needham has a buy rating on both stocks, Martin notes that The Trade Desk trades at a discount to Roku when viewed by profit-based valuation metrics.

The Trade Desk expects its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2019 to be about $209 million. This compares to Roku management's forecast for 2019 adjusted EBITDA between $29 million and $33 million. Yet The Trade Desk has a market cap of $11.9 billion and Roku has a market cap of $16.3 billion.

Further highlighting The Trade Desk's superior profits, Roku has an adjusted EBITDA margin of about 6%, while The Trade Desk's is about 32%. In addition, The Trade Desk boasts $100 million in trailing-12-month free cash flow, compared to $4 million for Roku.

Roku does, however, have The Trade Desk beat when it comes to its price-to-sales ratio. The Trade Desk's price-to-sales ratio is 19.6 and Roku's is 16.4. But The Trade Desk's profitability and meaningful positive free cash flow reduces the risk in the tech stock if a downturn in the market occurs, Martin argues.

2020 looks promising

Martin is onto something. Next year does look promising for The Trade Desk.

Not only will the election likely serve as an important catalyst for programmatic ad spend in 2020, but The Trade Desk's fast-growing audio and connected TV channels could have a more material impact on the company's results in 2020 as they grow to represent a larger portion of revenue, helping sustain the company's high revenue growth rates. Ad spend in these two channels rose 145% and 160%, respectively, year over year in the third quarter of 2019. Further, The Trade Desk CEO Jeff Green said CTV ad spend accelerated throughout its third quarter, suggesting this catalyst still has plenty left in the tank.