From Stumble to Springboard: Why TTD’s Pullback Could Be a Gift

The Trade Desk’s share price has a habit of racing ahead of the fundamentals and then pausing for breath. That pattern is on full display this spring. After peaking above $110 last autumn, the stock has compressed to the mid‑$50s—roughly where it traded three years ago and about 50 % below last year’s high watermark. The immediate trigger was a rare revenue miss in February and a guidance range that suggested growth was merely “mid‑teens” rather than the high‑twenties investors had come to expect. Yet, while sentiment has cooled, the underlying business has not stalled.

What the numbers say today

When The Trade Desk reports first‑quarter results on May 8, Wall Street is looking for revenue of about $575 million, up 17 % year on year, and EPS of $0.25. For the full year, analysts still pencil in $2.8 billion of revenue (+16 %) and EPS of roughly $1.80, implying that the February wobble was a stumble, not a trend shift. Yahoo Finance Nasdaq

Those estimates would keep TTD’s compound top‑line growth near 18 % for the next three years—not the break‑neck pace of its early days, but still 2‑3× faster than global ad spending. Yahoo Finance Management, meanwhile, reiterates a long‑term adjusted‑EBITDA margin target of 40 %, a level it has flirted with in stronger macro years and that would allow earnings to grow faster than sales. investors.thetradedesk.com

Why the runway remains long

• Connected‑TV remains the lodestar. As linear budgets bleed into streaming, advertisers need a neutral buying venue that can stitch together Disney, Peacock, Netflix and the swiftly growing universe of FAST channels. TTD’s UID2 identity standard, now embedded in many publisher log‑ins, is a differentiator here.

• Retail media is quietly becoming a second engine. Partnerships with Walmart, Target and a widening grocery network give TTD privileged access to SKU‑level shopping data that walled gardens can’t easily replicate.

• AI‑driven bidding (“Koa”) is bearing fruit. Last quarter management disclosed that campaigns using TTD's AI platform Koa, now account for most impression volume and lift return‑on‑ad‑spend enough to keep dollar retention above 95 %. Nasdaq

Taken together, those factors argue that mid‑teens growth could persist well beyond the 2025 cycle—particularly if political advertising returns in force next year.

Valuation, framed in stories rather than spreadsheets

At ~30 × the Street’s 2025 EPS and ~11 × sales, TTD is no bargain on absolute terms, but it is the cheapest the stock has looked since the pandemic. Assume the company sustains an 18 % revenue CAGR, lets operating leverage lift EPS to about $2.60 by 2028, and the market is willing to pay a 35 × multiple for an asset‑light platform still growing double‑digits; fair value drifts toward $90–$95, or a mid‑teens annualized return from today’s price.

Reverse the thought experiment: if revenue growth slides to low‑double digits, margins stall at the current mid‑30s and the multiple compresses to 25 ×, the five‑year price could languish in the mid‑$30s, translating into a negative CAGR despite rising earnings. The spread between those book‑end scenarios is the premium one pays for exposure to secular ad‑tech tailwinds.

Risks that keep the upside honest

• Macro‑sensitive budgets. Programmatic spend bends with the economic cycle; a hard landing could shave several points off growth.

• Identity & privacy overhang. Google’s cookie deprecation has been delayed again, but regulatory pressure—from the DMA in Europe to new U.S. state laws—remains fluid.

• Competitive intensity. Amazon’s DSP, Google’s DV360 and Roku’s OneView are all scaling quickly; none match TTD’s open‑internet footprint, yet each can lean on captive inventory.

• Valuation whiplash. As February showed, one quarterly miss can translate into a double‑digit percentage draw‑down when a stock trades on faith in flawless execution.

A balanced verdict

From my vantage point, the current quote offers the most inviting risk‑reward profile TTD has presented since early‑2020. Execution risk is higher than it was when “beat‑and‑raise” was a quarterly ritual, but the secular drivers—CTV, retail media and a post‑cookie identity layer—remain intact. Investors comfortable underwriting mid‑teens growth and a premium multiple could earn respectable double‑digit returns over a three‑to‑five‑year horizon. Those seeking a margin of safety anchored in absolute valuation will likely prefer to watch the next earnings print—and the market’s reaction—before stepping in.

Disclosure:  This commentary is for entertainment purposes only and does not constitute investment advice. Investing in equities is risky and can result in loss of principle. Perform your own due diligence or consult a licensed adviser before acting on any security.