Few stocks have had as rough a go over the past year as The Trade Desk (TTD 1.72%). Revenue growth has been slowing, which has caused investors to panic. It also can't seem to keep a person employed at the CFO position, which is another red flag. All this has added up to a stock that is down over 80% from its all-time high.
However, I think this sell-off is overdone. While I agree that The Trade Desk shouldn't be trading at the same premium that it was before the sell-off, today's price is just way too cheap for the business that The Trade Desk is. I think the market may realize that and cause a market rally.
This could propel The Trade Desk to be one of the best-performing stocks in 2026, making it a great buy now.
Image source: Getty Images.
The Trade Desk is still growing at a market-matching pace
During the fourth quarter, The Trade Desk's revenue grew at a 14% pace. However, it was its first-quarter guidance that gave investors the scare. It expects at least $678 million in revenue, indcating 10% growth. Since The Trade Desk was growing at over a 20% pace just a year ago, this slowdown is very concerning. However, I don't think it's so concerning that the stock should be trading as cheaply as it is.
TTD PE Ratio data by YCharts.
At a price-to-earnings ratio of 26 and a forward earnings ratio of under 12, The Trade Desk looks like an unreal deal right now. I believe it is, as the S&P 500 trades for 25.8 times trailing earnings and 21.9 times forward earnings. While the trailing earnings metric looks a bit expensive, that's because the company had some one-time charges during Q1 that skewed this metric. So in reality, it's actually cheaper than the market once those effects are stripped out from a trial earnings perspective.
It's not often that you get a chance to buy a stock this cheap, but is it worth it?
You can buy a stock that looks cheap and still overpay for it. The Trade Desk needs to find a way to reaccelerate its revenue growth, at least to the mid-teens. If it can do that, then I think the market will return it to at least a market-matching multiple, which would basically double its stock price (for a forward earnings perspective).
NASDAQ: TTD
Key Data Points
I think that's a fairly low bar to clear, and with The Trade Desk operating in a cutting-edge part of the advertising space, it shouldn't be that hard to do. I think the risk-reward profile here is fantastic, and investors should use this latest sell-off as a buying opportunity to scoop up a long-term winner.
