Shares of Circle Internet Group (CRCL 8.98%) and The Trade Desk (TTD 0.67%) have fallen 73% and 71%, respectively, from their highs. But certain Wall Street analysts believe the stocks are deeply undervalued.
- Jeff Cantwell at Seaport Research recently set his target price on Circle at $280 per share. That implies 300% upside from its current share price of $70.
- Mark Kelley at Stifel recently set his target price on The Trade Desk at $90 per share. That implies 125% upside from its current share price of $40.
Investors can purchase a share of both stocks with $110 as of Nov. 19. Here's why that's a good idea.
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Circle Internet Group: 300% implied upside
Fintech company Circle is the issuer of stablecoins USDC (USDC +0.00%) and EURC (EURC 0.46%), digital currencies tied to the U.S. dollar and the European euro, respectively. Stablecoins use blockchain to facilitate faster and cheaper transactions than traditional payment systems. USDC is the second-largest stablecoin by market value.
Circle earns the vast majority of its revenue from interest on reserve assets. Its stablecoins are backed by fiat currency reserves, which are held in cash or invested in short-term Treasuries. Reserve income is a function of circulating supply and interest rates, so monetary policy decisions from the Federal Reserve have a big impact on the company.
However, Circle is expanding into payments. The Circle Payments Network lets banks and other businesses move USDC balances, supporting use cases like remittances, supplier payments, and employee payroll. Management says 29 financial institutions have already joined the network, and the overall pipeline of companies looking to join recently hit 500.
Circle expects the volume of circulating USDC to grow at 40% annually for the foreseeable future. In turn, Wall Street expects revenue to increase at 33% annually through 2027. That makes the current valuation of 6.5 times sales look quite reasonable. Circle has fallen from its high partly because the market anticipates lower interest rates in the coming months, but the current price is still a good buying opportunity for long-term investors, though 300% returns in the next year seem overly ambitious.
NYSE: CRCL
Key Data Points
The Trade Desk: 125% implied upside
The Trade Desk is the leading demand-side platform (DSP) for the open internet. A DSP is a type of ad tech software that helps brands plan, measure, and optimize campaigns across digital channels. The open internet refers to the network of websites and applications not controlled by tech giants like Meta Platforms and Alphabet's Google.
The Trade Desk dominates connected TV (CTV) advertising, one of the fastest-growing categories in the market. But the stock has dropped sharply because investors are concerned about increased competition from Amazon, which recently reached deals to access advertising inventory from Roku and Netflix. Amazon also debuted AI tools that may help it take share across other areas of the open web.
However, The Trade Desk has an important advantage in its independence. It does not own media content or advertising inventory that could bias spending on its platform. Not only does that eliminate conflicts of interest inherent to Meta and Google, but it also means publishers are more willing to share data because The Trade Desk is not a competitor. In turn, the company says it has the best campaign measurement tools on the market.
Grand View Research estimates ad tech spending will increase at 14% annually through 2030. In turn, Wall Street expects The Trade Desk's adjusted earnings to increase at 15% annually over the next three years, which makes the current valuation of 22 times earnings look quite reasonable. While triple-digit returns in the next year may be a stretch, investors should feel comfortable buying a small position in this stock today.
