We came across a bullish thesis on The Trade Desk, Inc. (TTD) on Substack by Rijnberk InvestInsights. In this article, we will summarize the bulls’ thesis on TTD. The Trade Desk, Inc. (TTD)’s share was trading at $81.92 as of Feb 13th. TTD’s trailing and forward P/E were 105.03 and 60.98 respectively according to Yahoo Finance.
The Lobby Entertainment Network digital displays showing dynamic and visually engaging advertisements.
The Trade Desk (TTD) recently experienced a sharp 32% decline in its share price following its Q4 earnings report, wiping out $16 billion in market value. While the results were not disastrous, the company’s premium valuation left no margin for error. TTD missed both its own and Wall Street’s expectations for the first time in its history, leading investors to reassess the stock’s high multiple. However, despite the near-term disappointment, the underlying business remains strong, and the long-term investment thesis is intact.
As a leader in programmatic advertising, TTD offers a cloud-based platform that enables advertisers to manage digital ad campaigns across various channels, including connected TV (CTV), video, and display. Unlike Google and Meta, which operate within closed ecosystems, TTD provides advertisers with greater flexibility and access to data across the open web. Its AI-driven solutions enhance campaign performance through real-time analytics and audience targeting, driving strong growth and customer retention.
Despite these advantages, Q4 revenue came in at $741 million, up 22% year-over-year but missing consensus estimates by $18.5 million. This represented a notable slowdown compared to prior quarters and was the weakest growth rate since early 2023. While still respectable, the miss was a psychological blow given that TTD had consistently met or exceeded expectations since going public, barring the COVID-impacted Q1 2020. Management attributed the shortfall to execution missteps but reaffirmed confidence in the company’s long-term trajectory. CEO Jeff Green highlighted the expanding addressable market for programmatic advertising, particularly in CTV, where TTD maintains a strong position.
Despite the revenue miss, the company reported a robust 47% EBITDA margin for Q4, generating $350 million in EBITDA. For FY24, TTD posted total revenue of $2.44 billion (up 26% YoY), an EBITDA of over $1 billion at a 41% margin, and free cash flow of $630 million (26% FCF margin). The company remains a “Rule of 50” business, with its revenue growth and FCF margin consistently exceeding 50%, signaling strong profitability. Additionally, TTD maintains a fortress-like balance sheet with $1.9 billion in cash and no debt. Management announced a new $1 billion share buyback program to help offset dilution from stock-based compensation (SBC), which remains high at 17.4% of revenue but has been gradually decreasing.
The market’s negative reaction was largely driven by concerns over slowing growth and weaker-than-expected Q1 guidance. Management guided Q1 revenue to be at least $575 million, below the $583 million consensus estimate and reflecting 17% year-over-year growth. The Q1 adjusted EBITDA outlook of $145 million also fell short, raising concerns about near-term margin pressures. Furthermore, management signaled an acceleration in operating expense growth in FY25 but withheld full-year guidance, leaving uncertainty around the company’s trajectory. These factors contributed to an already cautious sentiment surrounding the stock.
Despite these headwinds, TTD’s long-term growth drivers remain intact. Management continues to highlight the significant opportunities in CTV, retail media, and the broader shift toward programmatic advertising. CTV advertising remains in the early stages of adoption, with significant upside as advertisers reallocate budgets from traditional linear TV. Retail media, once an emerging trend, is now becoming a central pillar of digital advertising as brands recognize its superior targeting and measurement capabilities. Moreover, global adoption of programmatic advertising remains in its infancy, with meaningful expansion opportunities in international markets. These secular trends reinforce TTD’s position as a dominant force in the evolving digital advertising landscape.
From a valuation perspective, the post-earnings decline has made TTD shares more attractive, even amid a moderation in growth. At a share price of $84, TTD now trades at approximately 45x forward earnings, down from a prior 60x multiple and well below its five-year average of 86x. While some multiple compression is justified, the current valuation appears to overly discount downside risks. The stock’s growth-adjusted PEG ratio now stands at 1.9x, a 35% discount to its historical average, suggesting that the sell-off may have been excessive.
Looking ahead, even with tempered expectations, TTD remains one of the most compelling long-term growth stories in digital advertising. Using a conservative 40x multiple and FY27 consensus earnings, an end-of-2027 price target of $118 per share implies potential annualized returns of 12%, making TTD an attractive opportunity for growth-focused investors. While short-term volatility may persist, the company’s industry leadership, strong market position, and favorable secular tailwinds provide a solid foundation for continued expansion. The recent pullback offers a compelling entry point for investors who believe in TTD’s long-term trajectory.
The Trade Desk, Inc. (TTD) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 42 hedge fund portfolios held TTD at the end of the third quarter which was 46 in the previous quarter. While we acknowledge the risk and potential of TTD as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher 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 was originally published at Insider Monkey.