We recently published a list of 12 Best Growth Stocks to Invest In According to Analysts. In this article, we are going to take a look at where The Trade Desk, Inc. (NASDAQ:TTD) stands against the other growth stocks.
Companies experiencing above-average earnings growth, which is often fueled by innovations and market expansions, are known as growth stocks. However, investing in them requires more than just chasing their rising share prices. These companies typically command higher valuations than their peers, which reflects investor confidence in their future potential. While they offer the prospect of substantial returns, they also come with heightened volatility and are susceptible to economic pressures like inflation and supply chain disruptions. Despite recent market fluctuations, periods of decline can present strategic entry points for long-term investors.
On February 20, Adam Crisafulli, Vital Knowledge founder, and Ryan Detrick, Carson Group chief market strategist, joined ‘Closing Bell Overtime’ on CNBC to discuss the state of the market. Detrick addressed the broadening nature of the market and the lack of panic following recent Fed minutes. He noted that all 11 sectors have increased year-to-date, with 7 sectors outperforming the S&P 500. Detrick highlighted that after two consecutive years of over 20% gains, the market has continued its upward trajectory, showing an increase of over 4%, almost 5%, so far this year. He emphasized that surprises in a bull market typically lean towards positive outcomes and reiterated that the ongoing rotation among sectors is beneficial for investors because it allows for a diversified portfolio.
Crisafulli then shifted the focus to specific companies which are set to report earnings. He connected these companies to trends in digital payments and marketing, emphasizing the role of data in driving customer loyalty and business growth in a modern economy. He discussed a broader theme of valuation reversion among high-multiple stocks and suggested that cheaper segments of the market are starting to catch up in terms of valuation expansion. Detrick added to this by discussing record highs for major indexes such as the S&P 500 and NASDAQ 100, as well as European indices like the DAX and Stoxx Europe 600. He also mentioned gold trading at record levels and questioned whether it is wise to invest at these heights or if the opportunity has passed. Detrick explained that they incorporated gold into their tactical models back in March 2023, adding more during a pullback post-election when the dollar rose sharply. He attributed gold’s rise to central bank indecision and suggested that the US dollar may have peaked. He advocated for including gold in a diversified portfolio, particularly within a 60-40 asset allocation model.
The overall discussion underscored the importance of diversification in investment strategies amidst changing market dynamics.
Methodology
We used stock screeners to compile a list of the top growth stocks. We then selected 12 stocks that had high average upside potential of over 30% and were the most popular among elite hedge funds. The stocks are ranked in ascending order of their average upside potential. We’ve also added the hedge fund sentiment for each stock, as of Q4 2024, which was sourced from Insider Monkey’s database.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A large array of computer screens and tech equipment representing the technology company’s self-service cloud-based platform.
The Trade Desk, Inc. (NASDAQ:TTD)
Number of Hedge Fund Holders: 63
Upside Potential as of February 19: 47.47%
The Trade Desk, Inc. (NASDAQ:TTD) provides a powerful, cloud-based platform that revolutionizes digital advertising. By enabling buyers to plan, manage, and optimize data-driven campaigns across diverse formats and channels, it empowers advertisers to reach their target audiences on a global scale.
The company’s growth is anchored in its AI-powered advertising platform. The Kokai platform, its latest upgrade, is designed to enhance precision and value for clients, driving audience expansion. Retail data offerings are also a focus, which allows clients to measure real-world return on ad spend. Positioning itself within the $1 trillion advertising industry, the company currently manages over $12 billion in ad spend. It’s preparing for potential shifts in the open internet, notably a possible reduction in Google’s involvement, and emphasizing its objectivity as a key differentiator. It’s also pushing Connected TV to become the leading channel in programmatic advertising.
The Trade Desk, Inc. (NASDAQ:TTD) is driving the adoption of OpenPath for a more efficient supply chain and actively pursuing Joint Business Plans (JBPs) with major brands and agencies, which outpace its general growth by 50%. The company is transitioning all clients to the Kokai platform. Q4 2024 revenue was up 22% year-over-year, with Q1 2025 revenue growth forecasts around 17%. CTV remains a dominant channel, accounting for a high-40s percentage share of the business.
Rowan Street Capital cited this company as their most successful investment, achieving a 54% annualized return due to opportunistic initial purchase during the pandemic and subsequent significant valuation expansion. It said the following regarding The Trade Desk, Inc. (NASDAQ:TTD) in its Q4 2024 investor letter:
“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)
Overall, TTD ranks 5th on our list of the best growth stocks to invest in according to analysts. While we acknowledge the growth potential of TTD as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an 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.
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Disclosure: None. This article is originally published at Insider Monkey.