Connected TV stocks were all the rage during the pandemic, but many of these same stocks have crashed from their highs. Roku is getting acquired for $160 per share after almost reaching $500 per share in 2021.
The Trade Desk (TTD -2.58%) is a similar story, but without the buyout. The stock is down by more than 50% year to date, and its $18 price tag is a far cry from the $140 per share it hit near the end of 2024.
The Roku deal has brought more attention to The Trade Desk stock, and its 20.6 P/E ratio makes it worth looking at now. Here's what you should know about the stock.
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The days of 20% growth rates appear to be over
Part of The Trade Desk's ability to outperform the S&P 500 during its peak was its ability to consistently generate 20% or more year-over-year revenue growth. Investors didn't like it when The Trade Desk indicated that those days were over.
The Trade Desk delivered 12% year-over-year revenue growth in the first quarter, compared to a 25% year-over-year growth rate when it reported earnings for Q1 2025. This fading growth rate is a major area of contention, and Q2 guidance only implied at least $750 million in revenue, which would represent an 8% year-over-year growth rate.
Profit margins also compressed to just below 6%, compared to double-digit margins. Growth isn't what it used to be, but retention remains high. The Trade Desk closed out Q1 with a retention rate above 95%, maintaining a streak that has lasted for more than a decade.
The Trade Desk isn't going to move like an AI stock anytime soon, but the drop seems overdone at this point. The stock now trades at a P/E ratio of 20.6. Less than a year ago, its P/E multiple was closer to 90. While The Trade Desk doesn't deserve that valuation now, its current valuation is more reasonable based on its current growth rates.
Investors may not like that the 20%-plus revenue growth days are over, but the stock still has something to offer. Investors who are looking to diversify into online advertising stocks may want to give it a closer look. However, if you are chasing growth stocks with substantial long-term potential, you may want to look elsewhere.
The Trade Desk is more of a value stock than a growth stock. While the drop looks overdone at this point, investors shouldn't expect this stock to shoot up like a rocket ship anytime soon.