Is Now the Time to Invest in This Resilient Growth Stock?

Despite a significant decline of approximately 74% from its all-time high, The Trade Desk continues to show strong underlying business growth. As an advertising technology company, it is set to report its fourth-quarter results in early February. Investors remain hopeful that this report could recover recent losses.

Performance Overview of The Trade Desk

The Trade Desk’s stock price recently closed over $139 at its peak. Currently, it trades around $34.82. This drop reflects a 55% decrease over the past five years, raising concerns among investors. However, the company’s revenue and earnings have experienced positive trends during this same period.

Growth Metrics

• The Trade Desk reported third-quarter revenue of $739 million, marking an 18% increase year over year.
• This growth rate has slowed from 19% in the second quarter and 26% for the entire year of 2024.
• Customer retention remains high at over 95%, continuing a successful streak that has lasted 11 years.
• Excluding political ad spending, third-quarter revenue grew by 22% year over year.

CEO Jeff Green credits this momentum to product innovations within the company’s Kokai platform, which utilizes artificial intelligence for programmatic ad buying.

Share Repurchase and Stock Valuation

The Trade Desk is actively repurchasing shares, with a recent authorization for an additional $500 million. Previously, it utilized $310 million for share buybacks in the third quarter alone. However, the stock’s high valuation remains a concern.

• Price-to-earnings ratio stands at approximately 42, considerably higher than other tech giants like Alphabet, Meta, Amazon, and Microsoft.
• The company forecasts fourth-quarter revenue of at least $840 million, signifying a projected growth of about 13% year over year.

Investment Considerations

The high valuation raises questions about potential for error in the current stock price. Although The Trade Desk’s performance reflects resilience, the deceleration in revenue growth prompts caution among investors.

For those contemplating investment, it may be wise to wait for a better opportunity. Should the company demonstrate improved revenue growth rates, revising investment strategies could be an option. For the moment, the combination of high stock prices and slowing growth rates suggests a prudent approach to investing in The Trade Desk.