Shares of The Trade Desk (NASDAQ:TTD) have taken a beating recently. The stock of the company, which provides a programmatic digital ad-buying platform, is down more than 25% since an all-time high toward the end of July. Much of this decline is likely due to shares taking a breather after a huge run-up. Indeed, even when including this decline, the stock is still up 42% over the past year and about 250% over the past two years.

But has this sell-off gone too far?

Sure, when the stock was trading at its 52-week high a few months ago, it had a price-to-sales ratio of about 24. Even today, The Trade Desk has a price-to-sales ratio of 17.5. In other words, the stock's valuation is pricing in some significant growth in the years ahead. But expectations for The Trade Desk should be high.

There are a host of reasons to expect strong growth from the company in the coming years, including secular tailwinds in programmatic advertising, the company's compelling value proposition to advertisers as an independent ad-buying platform, its broad collection of fast-growing advertising channels, and more.

But the one catalyst that investors should really be giving some serious weight to in their analysis is the company's momentum and opportunity with ads for connected TV (CTV). CTV is a monster catalyst with lots of room for more growth.

A group of young people watching TV together

Image source: Getty Images.

Surging growth

"I have said before: We will likely never see a channel larger and more full of opportunity than we have right now in CTV," said CEO Jeff Green in the company's second-quarter earnings call. "Much of what we've done over the last decade has simply been a dress rehearsal for the digital shift happening in TV right now."

Green frequently espouses the exciting opportunity of the CTV market in the company's earnings calls. For instance, in The Trade Desk's first-quarter earnings call last year, Green said that, "There is nothing more exciting in media than what is happening in connected TV."

Of course, the digital advertising opportunity for the convergence of internet and TV is evident by more than Green's comments; it's showing up in the company's results. Connected TV ad spend was 2.5 times greater in the second quarter of 2019 than it was in the year-ago quarter.

An enormous addressable market

While The Trade Desk's strong growth in digital ad spend on its platform is likely to decelerate over time, investors should still expect strong growth from this catalyst for the foreseeable future.

As Green noted in the company's second-quarter earnings call, "We are at the very beginning of the digitization of TV advertising."

He explained: "[A]s we drive toward a $1 trillion total advertising market by 2027, about half of that market will be in some form of video. And most of that will be in premium TVs."

Plenty of third-party studies agree with Green's bullish outlook for CTV.

Digital TV Research forecasts global CTV ad spend will rise from about $70 billion to more than $123 billion by 2023. 

Furthermore, Magna Global estimates that over-the-top (digital content streamed to a TV through an internet-connected device) ad spend in the U.S. will come in at $3.8 billion in 2019 -- up from $2.7 billion in 2018. Importantly, this is just a sliver of the $70.8 billion that will be spent on traditional television in the U.S., according to an eMarketer estimate.

While it's unclear how much of The Trade Desk's revenue is coming from its CTV channel, management has said the channel is contributing materially to the company's growth.

These are the early innings in CTV -- and The Trade Desk is positioned to benefit from this fast-growing market.