The market recently sold off some of the best-performing growth stocks, as investors are concerned about what the economy will look like given the unknowns of trade and tariff policies. This has caused some stocks that were already selling off before the tariff policy to get hit even harder, which opens up fantastic buying opportunities for long-term investors.
One of those I've recently increased my position in is The Trade Desk (TTD 1.36%). The Trade Desk had a rough fourth quarter and has announced some changes. Investors didn't like this: The stock tumbled following Q4 earnings and has been heavily sold off ever since. However, the stock has now reached a bargain-bin price point and looks like an excellent long-term buy.
The Trade Desk is an important partner in advertising
Not many people are familiar with The Trade Desk, but you've likely interacted with its software without knowing. The Trade Desk is in the programmatic advertising platform business and helps ad buyers place their ads in the most advantageous locations.
The Trade Desk puts ads in (among other places) podcasts, videos, and its most important segment: connected TV. Linear TV has long been one of the most important places to advertise, as its broad reach is unparalleled. However, with a rise in streaming services, there is a massive opportunity for programmatic advertising to step in and put targeted ads on TV rather than broadcasting the same ad to a wide audience.
NASDAQ: TTD
Key Data Points
This is a huge market opportunity, and it's one that I'm happy to invest in.
Until this past quarter, The Trade Desk was a monster winner, rising 350% from the start of 2020 to the start of 2025. However, after a bad Q4, investors heavily sold off the stock, and it's now about 60% down from its all-time high.
So what happened in Q4 that was so bad?
Management owned up to some mistakes
Over its time as a public company, The Trade Desk had never missed a revenue growth projection that management had set for itself, but it did in Q4. Management guided for Q4 revenue of $756 million but fell short, coming in at $741 million. Furthermore, management projected $575 million in revenue for Q1, indicating 17% growth. That's a huge growth slowdown, especially with what investors have been used to seeing with The Trade Desk.
TTD Operating Revenue (Quarterly YoY Growth) data by YCharts
Part of this pain comes from a platform transition, as The Trade Desk is migrating users from Solimar to Kokai, which it expects to be completed during 2025. CEO Jeff Green stated that managers could have made some decisions to boost short-term sales, but they chose to focus on the long-term opportunity to maximize The Trade Desk's relationship with its clients.
Green also said there were execution mishaps, which he used a sports analogy to compare:
If this were a sporting event, we'd still have a championship-caliber team. But in this particular game, we turned over the ball too many times. That said, we see a larger and faster-growing market than we originally expected which is why we have been making changes and will continue to do so.
Clearly, Green is still excited about the long-term opportunity, but they haven't been perfect in their execution along the way. I still think The Trade Desk's long-term track record speaks for itself, and the company will be all right. However, given how negative the stock market is concerning The Trade Desk's stock, I think it's time to dive in and take a position, as the stock looks rather cheap.
The Trade Desk's stock looks like a great buy right now
After the sell-off, The Trade Desk has lost its premium valuation.
TTD PE Ratio (Forward) data by YCharts
A valuation of 30 times forward earnings still isn't necessarily cheap, but it's a far better price tag than just a few months ago. Given how large a market The Trade Desk is attempting to capture, I'm confident that it can grow into this slight premium valuation and be a winning investment from here on out.
Now is a great time to take a position in a stock that's rarely on sale, as the broader market sell-off is compounding the sell-off from Q4. This is a rare opportunity for investors, and you should take advantage of it if you can maintain a five-year outlook.
