What a difference a year makes! Stocks were riding high in 2024 on artificial intelligence (AI) enthusiasm and a strong U.S. economy. Then, the markets got a boost after the election, as many thought the new U.S. presidential administration would be stock market-friendly. It may end up being so in the long run, but so far in 2025, investors are fretting. The Nasdaq Composite and S&P 500 indices recently entered corrections (falling more than 10% down from their highs).
So, what should investors do now? First, be cautious. No one knows when the market will turn around or how low it will go. It's wise to keep some cash on the side. Second, look for high-quality companies that trade for tantalizing valuations. Market downturns aren't universally negative. We need them to keep bubbles from forming, and buying while stock prices are low is a key component in making outsized gains. "Buy low, sell high" needs to be put into action, not just be a mantra.
With this mentality in mind, The Trade Desk (TTD +1.68%) looks like a screaming long-term buy now. Here's why.
What happened to The Trade Desk stock?
The Trade Desk stock got walloped by a one-two punch recently. First, its fourth-quarter 2024 results missed the company's estimates for the first time in 33 quarters (more than eight years). Then, the broader markets sold off, dragging the stock down even further. As you can see below, the result is a stock trading down 50% from its recent high.
NASDAQ: TTD
Key Data Points
The extreme drop in the stock price looks like an overreaction to the earnings miss. Although it fell short of estimates, the quarter wasn't catastrophic, and neither was 2024 as a whole. Q4 2024 sales reached $741 million on 22% year-over-year growth, and operating income rose from $144 million in Q4 2023 to $195 million in Q4 2024. The Trade Desk also had record results in 2024 with revenue and operating income hitting new highs, as shown below.
Data by YCharts.
The $2.4 billion in top-line trailing-12-month sales represented a 26% increase over 2023, and the $427 million in operating income was an impressive 113% increase. The Trade Desk also improved its balance sheet in 2024. It started the year with $1.4 billion in cash and investments and finished with $1.9 billion and no long-term debt. While it missed its own guidance, The Trade Desk is hardly a distressed company.
Is The Trade Desk stock a buy now?
Advertising, especially on streaming television, is increasingly programmatic. In programmatic advertising, a publisher with ad space to sell will send out a bid request, which will be answered by a demand-side platform (DSP) like The Trade Desk. The DSP bids on behalf of its clients, and the advertisement runs during your favorite binge-worthy streaming show. It happens in a fraction of a second.
The Trade Desk also offers its clients immense amounts of data and feedback on the campaign's success, making it an invaluable resource for advertisers. The movement of people toward streaming platforms and multiple subscription services is a tremendous tailwind for The Trade Desk, as evidenced by its steadily rising revenue.
The Trade Desk's stock was quite expensive until the recent one-two punch. Now, it's nearly as inexpensive as it was during the absolute bottom of the March 2020 COVID-19 crash, as you can see below.
Data by YCharts.
The price-to-sales ratio (P/S) drops to just 9 on a forward basis. As you can see, that is well below recent valuations. The market appears to be pricing The Trade Desk stock like the company is in serious trouble, but the results discussed suggest otherwise. Yes, the company missed its earnings estimates. However, its successful track record, brisk tailwinds, and still-quality results make it an extremely compelling long-term buy at this price.
