Even though The Trade Desk’s shares have faced some hurdles, there’s still a lot to admire about the company.
Back in 2023 and 2024, the Nasdaq Composite delivered impressive results, soaring with an 84.5% gain over those two years. However, by March 13, it dipped to 17,303.01, marking a 14.2% decline from its December 16 high of 20,173.89, plunging it into correction territory. While there’s been a slight recovery in recent weeks, the index remains around 10% below its previous peak.
Predicting whether it will fall further in the near future is a challenging task. Historically speaking, many stock market corrections have been succeeded by robust recoveries. Insights from Clearnomics and Standard & Poor’s, evaluated by Covenant Wealth Advisors, suggest that markets typically decline from peak to trough over five months and bounce back within four months, on average. Although we can’t rely on past patterns to forecast future behaviors, these trends offer some perspective.
Given this scenario, it might just be the opportune moment to consider putting money into high-quality companies that are financially resilient, boast strong competitive advantages, and are currently undervalued. The Trade Desk (TTD -5.10%) is one such stock. Its shares have plummeted nearly 52% in 2025 and are down 60.2% from their all-time high in December.
There are numerous reasons why such a steep decline could present an enticing opportunity for long-term investors willing to weather a bit of short-term turbulence.
### Temporary Setback
The Trade Desk’s fourth-quarter performance wasn’t quite as expected, missing both analysts’ projections and its own guidance. CEO Jeff Green attributed this shortfall to executional hiccups amid a company-wide reorganization in December, which focused on clarifying roles, altering the reporting structures, and boosting internal efficiency and scalability.
Once these execution challenges are addressed, the company stands a strong chance of getting back on its growth track.
### Multiple Tailwinds
The Trade Desk operates as an independent demand-side platform, facilitating optimal ad placements across various content channels for advertisers. In 2024, it handled about $12 billion in ad spend on its platform, making up more than 1% of the massive $1 trillion global advertising industry. This indicates ample room for growth.
One of the company’s most rapidly expanding segments is connected television, contributing a significant portion of revenue—hovering in the high 40s percentile in the last quarter. As audiences continue to shift from traditional TV to streaming, connected TV advertising’s share within the company’s revenue mix is poised to expand swiftly in upcoming quarters.
Unlike its major competitors like Alphabet and Amazon, which house their own ad inventories and create closed ecosystems to retain clients’ ad spend, The Trade Desk doesn’t own ad inventory. This independence allows it to concentrate solely on placing ads in the way most advantageous for advertisers, factoring in elements like price and audience reach.
Thanks to the absence of conflicting interests, The Trade Desk enjoys a more transparent and unbiased operation compared to its “walled garden” counterparts, which enhances client trust. CEO Jeff Green anticipates Google might eventually retreat from the open internet due to growing antitrust issues and regulatory challenges, creating fresh opportunities for The Trade Desk.
With its commitment to transparency, The Trade Desk has also cultivated a robust retail data framework, empowering advertisers to gain deeper insights into conversion rates and the effectiveness of their ad expenditures on consumer behavior.
The company also foresees substantial growth opportunities in the audio channel, which CEO Green describes as “still the most underutilized corner of the open internet.” Numerous leading digital audio platforms have already embraced the company’s Unified ID 2.0 (UID2) technology, which forgoes relying on cookies for ad targeting.
Finally, The Trade Desk was forward-thinking in its adoption of artificial intelligence (AI) technologies. Back in 2023, it rolled out Kokai, an AI-powered media buying platform that enables clients to leverage superior data and insights, yielding a greater return on their ad investments.
### Strong Financials
In 2024, The Trade Desk saw its revenues climb by 26%, reaching $2.4 billion. The company also reported an adjusted EBITDA margin surpassing 41%, alongside a cash flow exceeding $630 million. Its solid financial foundation is further evidenced by a strong balance sheet with $1.9 billion in cash and short-term investments, paired with minimal debt.
### Valuation
Currently trading at about 11.4 times its sales, The Trade Desk’s valuation is notably lower than its historical price-to-sales ratio of 22.9. While its price-to-earnings ratio of 72.2 might seem steep, it’s still considerably below the five-year average of 125.2. Given the strong tailwinds it’s poised to benefit from, coupled with its relatively attractive valuation, The Trade Desk appears to be a smart investment choice at this juncture.
