While many stocks have been affected by the marketwide sell-off, few stocks have had as much bad luck as The Trade Desk (TTD 1.75%). The Trade Desk has been hit by two sell-offs, the first being self-inflicted.
The Trade Desk didn't have a great Q4, which was followed by the general sell-off. As a result, the stock is dirt cheap despite having fantastic long-term growth prospects. I think it's one of the top bargains in the market right now, and investors cannot afford to miss it.
The Trade Desk stumbled in Q4
There are two sides to an ad: buyers and sellers. Ad sellers are those with advertising space, such as a TV network or a website. Ad buyers are companies with products or services they try to advertise. The Trade Desk specifically works with ad buyers alone, as its stance is that by serving only one side of the transaction, it only has pure intentions to find its clients the best possible location in which to advertise.
This is key, as The Trade Desk's platform and approach are different from those of Alphabet (GOOG 0.87%) (GOOGL 0.75%) and Meta Platforms (META 2.33%), which handle both sides of the transaction on their platforms. While these two handle ads on their platform (which is a substantial part of the internet ad space), The Trade Desk focuses on the rest of the internet and other areas like connected TV and podcasts.
These areas have seen massive growth in advertising dollars as companies realize how effective ad buying in these areas can be, which has led to strong and sustained growth for The Trade Desk.
TTD Operating Revenue (Quarterly YoY Growth) data by YCharts
Sometimes, strong growth just isn't enough. In Q4, The Trade Desk missed its quarterly revenue guidance for the first time in company history. Management owned up to the miss and didn't try to blame secular factors for why they missed guidance. They clearly stated that the miss occurred because it transitioned to a new platform for its customers. CEO Jeff Green stated that they could have made short-term decisions to meet that revenue goal, but that would have come at the expense of long-term client satisfaction, so they chose to deal with the consequences of a revenue miss.
NASDAQ: TTD
Key Data Points
While that's a great sign for long-term investors, Wall Street didn't appreciate it in the short term. The stock got slammed after reporting earnings, falling more than 30% the day after reporting earnings. This sell-off was compounded by the marketwide sell-off, and now The Trade Desk's stock sits around 65% down from its all-time high.
However, I think this is a golden buying opportunity, as deals like this don't come around often for The Trade Desk's stock.
The future looks bright for The Trade Desk, and the stock is far cheaper than it has been
In addition to missing revenue guidance for Q4, they gave weak guidance for Q1. However, Wall Street still expects 18% growth for 2025 and 20% growth for 2026. The Trade Desk is clearly still a growth stock and is capitalizing on the general move to a more connected advertising environment. The biggest growth driver here is the shift from linear TV to connected TV, which allows advertisers to cater exactly to who is watching a TV show rather than running a blanket ad to what audience it thinks is watching.
This transition is far from complete, but it will continue to raise The Trade Desk's revenue for years to come.
The Trade Desk is also a profit-generating machine, posting a 25% profit margin in Q4.
TTD Profit Margin (Quarterly) data by YCharts
This profitability should bolster investors' confidence in the stock, as it isn't an unprofitable company solely dependent on growth.
As for valuation, you used to be able to make the case that the stock was overvalued, but that's no longer true.
TTD PE Ratio (Forward) data by YCharts
At 28 times forward earnings, The Trade Desk stock isn't dirt cheap by any measure, but it is priced well for the growth that it's expected to deliver over the next few years.
If you're looking for a solid stock to buy that's been severely affected by the stock market sell-off and will continue to thrive for years to come, you could do a lot worse than scoop up shares of this dominant ad player.
