Over the last few years, ad platform The Trade Desk (TTD 1.46%) has been on fire. The company has lived and breathed hyper-growth -- thanks to the disruption of traditional advertising and the shift toward digital media. As a result, The Trade Desk has delivered triple-digit percentage gains worthy of any superstar tech stock. In December 2020, The Trade Desk hit an all-time per-share high of $972 -- up 5,300% from its IPO price.

But since then, this high-flying stock has come crashing back to earth. The Trade Desk is now trading at $592 a share, down about 39%. Is this drop a buying opportunity -- or a sign of darker days to come? Let's find out.

A man in a suit wears a blindfold and holds his hands up.

Image source: Getty Images.

The bull case

With COVID-19 knocking the wind out of most businesses globally, there was simply no escape for The Trade Desk. By the second quarter of 2020, The Trade Desk's revenue was down 13% year over year. That was a drastic drop, considering revenue had grown 42% during the same period in 2019. But The Trade Desk bounced back in the latter half of 2020, as more advertisers realized just how valuable programmatic advertising can be. It ended the year with a 26% growth in revenue, while net income more than doubled year over year.

The Trade Desk's performance speaks volumes about the strength of its business model -- even during one of the worst years ever for the advertising industry. For example, the Trade Desk operates across multiple digital ad channels such as connected TV (CTV), mobile, video, audio, and display. This wide reach gives it exposure to growth throughout the entire digital landscape. While traditional ad channels suffered throughout 2020, newer digital ad channels like CTV saw rapid adoption as people switched from cable to streaming services. This, in turn, benefited The Trade Desk.

The Trade Desk executed well in 2020 and has continued doing so in 2021. In the first quarter of 2021, revenue grew 37% year over year to $219.8 million. And despite its recent performance, the company is just getting started. Over the next few years, it can easily deliver double-digit percentage growth as it expands its market share. While the company is already the biggest programmatic ad platform, its share of global ad spending -- a $725 billion market -- is still less than 1%.

Moreover, The Trade Desk has CEO Jeff Green, a visionary who founded the company and is responsible for much of its success. Green also has serious skin in the game, owning a $2.5 billion stake in the company. With Green firmly in the driver's seat, The Trade Desk has what it needs to keep growing fast for years to come.

The bear case

There's no doubt that The Trade Desk has been incredibly resilient in the face of the pandemic. But moving forward, near-term headwinds could derail its growth and impact its financial performance. Chief among them is The Trade Desk's plan to ramp up investments, with a focus on CTV platforms and international growth. While this bet may pay off in the long term, it could impact The Trade Desk's earnings in 2021.

For its part, The Trade Desk has also flagged two risks that could slam the brakes on revenue growth. The first is Apple's upcoming change to its identifier for advertisers (IDFA), which will make it easier for iOS users to opt out of advertiser tracking. On top of that, Alphabet's Google is banning third-party cookies used to serve and target ads. Both developments could impact ad spending, which might hurt platform operators like The Trade Desk.

A slowdown in growth is bad news for The Trade Desk, which investors see as a high-octane growth stock. In fact, its recent share price drop reflects some of this concern.

Is The Trade Desk a buy now?

In the coming years, The Trade Desk has what it takes to sustain growth at high rates. Its business model has proven rock-solid in the face of COVID-19, and the company benefits from having a proven leader at the helm.

Still, the road ahead isn't all clear for The Trade Desk, given its short-term challenges. But the real deal-breaker for me is the stock's absurdly high valuation. Even after shedding nearly 40% of its value, The Trade Desk trades at 30 times sales and over 100 times earnings. At these price levels, shareholders are walking a tightrope. Any bad news related to The Trade Desk -- or a further correction in tech stocks -- could send share prices hurtling downward.

All told, The Trade Desk is a classic case of a wonderful company that could turn out to be a terrible investment. Until its stock price gets a whole lot more attractive, I'll be sitting this one out.