1) The Trade Desk, Inc. (NASDAQ:TTD)
Number of Hedge Fund Holders: 42
The Trade Desk, Inc. (NASDAQ:TTD) caters to the buy side of the digital advertising market. Its self-service platform enables ad buyers to create and manage digital advertising campaigns throughout all major channels.
The Trade Desk, Inc. (NASDAQ:TTD) continues to benefit from its exposure to the fast-growing digital advertising industry. Apart from the sectoral tailwind, the company has innovated itself through tools such as cookie-less tracking solution, Unified ID 2.0, and Kokai (AI-driven media-buying platform). The Trade Desk, Inc. (NASDAQ:TTD) has also entered into new digital media channels such as connected TV (CTV), or ad-driven streaming.
As per industry experts, Connected TV (CTV), a category including devices like Roku and Xbox, should act as one of The Trade Desk, Inc. (NASDAQ:TTD)’s biggest long-term opportunities as ad-based streaming services increase. The company’s software powers CTV advertising in more than 90 million US households (as of Q3 2024), and CTV is expected to be the fastest-growing part of its business. In Q3 2024, the company saw its revenue increase by 27% YoY to $628 million. This was largely driven by its CTV advertising growth.
The Trade Desk, Inc. (NASDAQ:TTD)’s strategic partnerships with some of the major streaming platforms should fuel growth in CTV advertising over the next quarter and in 2025. These alliances, such as with Disney, Netflix, and Spotify, offer the company privileged access to premium inventory and vast audiences. This should place The Trade Desk, Inc. (NASDAQ:TTD) at the forefront of the rapidly expanding CTV market.
With more and more viewers shifting from traditional linear TV to streaming services, advertisers are expected to follow suit. This should result in reallocating budgets to where audiences are most engaged. Rowan Street Capital, an investment management company, released a Q2 2024 investor letter. Here is what the fund said:
“We have owned The Trade Desk, Inc. (NASDAQ:TTD) for a little over 4 years now, opportunistically establishing a position in March of 2020 at a cost basis of $17.40 (split-adjusted). Since then, TTD has appreciated nearly sixfold, delivering an annualized return of approximately 55%. These are indeed remarkable results, but it’s important to recognize that this journey has been far from a smooth ride—much like many of our other investments. Since its public debut in 2017, the stock has experienced several significant drawdowns, with the most notable occurring in 2022 when it declined by over 60% (see below).
As we have previously discussed in relation to our investments in Meta and Spotify, one would have to be comfortable with sitting through these dramatic drawdowns and keeping their emotions in check in order to realize the long-term rewards of compounding that this company had delivered…” (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 timeframe. 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: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
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