1) The Trade Desk, Inc. (NASDAQ:TTD)
Average Upside Potential: ~63.5%
Number of Hedge Fund Holders: 63
The Trade Desk, Inc. (NASDAQ:TTD) operates as a technology company, providing a cloud-based, AI-driven platform for programmatic advertising, allowing organizations to purchase and optimize digital ad placements. The Connected TV (CTV) market reflects a significant growth opportunity for the company. With viewers shifting from traditional linear TV to streaming platforms, advertisers continue to follow, and are shuffling budgets to reach these audiences effectively. The Trade Desk, Inc. (NASDAQ:TTD) established robust partnerships with major CTV platforms and content providers, placing it at the forefront of such transition.
The Trade Desk, Inc. (NASDAQ:TTD)’s CTV operating system, Ventura, and the supply path optimization capabilities provide it a competitive advantage in this ever-evolving segment. The advertisers who are looking for a unified approach to reach audiences through multiple streaming services can find The Trade Desk, Inc. (NASDAQ:TTD)’s offering appealing. With the world’s leading advertisers shifting to premium scalable channels in contrast to the limitations of user-generated content, there remains a significant opportunity. Moving forward, the company is well-placed to help its clients take full advantage of data-driven advertising on the premium internet.
With the growth in the broader technology industry, advertising has become automated, AI-powered and data-driven. The Trade Desk, Inc. (NASDAQ:TTD) remains at the forefront of this transformation as it continues to benefit from the expansion of streaming, AI, and retail media. Rowan Street Capital, an investment management company, released its Q4 2024 investor letter. Here is what the fund said:
“The Trade Desk (TTD): Investment Initiated: March 2020
Internal Rate of Return (IRR): 54%
The Trade Desk has been our most successful investment to date. March 2025 will mark five years since we opportunistically initiated our position at a cost basis of $17.40 (split-adjusted). Since then, TTD has appreciated more than sevenfold, delivering an annualized return of approximately 54%.
These exceptional results far outpace the company’s strong fundamental growth, with revenues and earnings compounding at approximately 25% annually over this period (refer to the table below). The primary reason for this outsized return lies in the price at which we were able to acquire TTD during the early days of the pandemic, when market fears briefly drove it down to just 10x revenues. Today, the valuation has expanded significantly to approximately 25x revenues, amplifying our returns…” (Click here to read the full text)
While we acknowledge the potential of TTD as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than TTD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
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