Investors Question The Trade Desk’s Future Amidst Recent Decline
Shares of The Trade Desk (NASDAQ: TTD) have dropped nearly 50% since the beginning of 2025, surprising many investors. This advertising technology (adtech) company has historically provided significant shareholder value. Since its IPO in 2016, the stock has appreciated about 2,000%, even factoring in the recent downturn.
Since going public, The Trade Desk has consistently surpassed its financial guidance. For instance, if management projected revenue of $100 million, the company typically reported around $101 million. This reliability signaled strong demand forecasting capabilities and allowed the management to cultivate investor trust without overcommitting.
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However, this reputation faltered in 2025 when The Trade Desk reported fourth-quarter revenue of $741 million, falling short of the $756 million it had predicted. Founder and CEO Jeff Green acknowledged, “For the first time in 33 quarters as a public company, we fell short of our own expectations,” which raised concerns among investors.
As a result of unmet expectations, The Trade Desk’s stock took a significant hit. Yet, there are three compelling reasons why this stock could be a worthwhile investment for long-term holders.
1. A Large Market Opportunity
For those investing in individual stocks, long-term revenue growth is crucial. Research indicates that many of the top-performing stocks maintain superior revenue growth over time.
To achieve sustained growth, businesses must address substantial market opportunities. The Trade Desk is positioned within a vast market. It specializes in programmatic advertising, enhancing the ability to target consumers with relevant ads. This approach allows advertising clients to obtain better results at lower costs.
The Trade Desk is witnessing rapid growth in connected TV (CTV). The industry is transitioning from linear TV to streaming, with many services adopting ad-supported models, including subscription-based platforms. The Trade Desk is a key player in facilitating this transformation.
The company estimates that its total addressable market exceeds $935 billion, while its current operations represent about $12 billion. This highlights the scale of competition it faces from major players like Alphabet and Meta Platforms. This ambitious endeavor underscores the magnitude of its potential.
With growth being vital for investments, The Trade Desk is firmly planted in a favorable industry.
2. An Impressive Track Record
It’s important to clarify that calling The Trade Desk a must-buy stock doesn’t equate to a guarantee of success moving forward. Various factors could impede profitability, including considerable competition from industry giants such as Alphabet.
Nonetheless, The Trade Desk has consistently outperformed expectations in 32 of its 33 quarters since going public. Therefore, the latest quarter’s shortcoming is likely an isolated incident rather than a sign of an ongoing trend.
Giving the management team the benefit of the doubt, it seems poised to regain investor confidence quickly. CEO Green stated that the recent miss was due to internal challenges rather than competition, mentioning a need for organizational adjustments as the company surpasses $2 billion in annual revenue.
If this experienced leadership is correct, the recent decline may prove to be a temporary setback. Ultimately, The Trade Desk could emerge as better-equipped for future scaling efforts.
3. More Attractive Valuation
While The Trade Desk’s stock may not be considered “cheap,” its valuation is becoming increasingly intriguing. On both a price-to-sales and a price-to-free-cash-flow basis, the stock has fallen roughly 50% from its historical averages.
TTD PS Ratio data by YCharts
Though these metrics may not align with traditional value-investor perspectives, overlooking high growth rates can prevent recognizing long-term value. If The Trade Desk continues to gain market share, it has the potential to generate significant shareholder value moving forward.
Moreover, if the company is able to restore investor confidence, it could reclaim its premium valuation over time.
In summary, although The Trade Desk may not fulfill its potential, and its valuation could still decline further, its pursuit of a vast opportunity combined with its impressive track record and current valuation offers compelling reasons to consider investment. Investors might want to slowly acquire shares in the coming weeks and months as an entry strategy.
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Randi Zuckerberg, a former director of market development at Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is on The Motley Fool’s board. Additionally, Suzanne Frey, an executive at Alphabet, serves on The Motley Fool’s board. Jon Quast holds no positions in any mentioned stocks. The Motley Fool has stakes in and endorses Alphabet, Meta Platforms, and The Trade Desk, with a disclosure policy in place.
The opinions expressed here belong to the author and do not necessarily reflect those of Nasdaq, Inc.
