Though its stock price is down about 74% from all-time highs, its underlying business is growing at double-digit rates.
Typically reporting its fourth-quarter results in the first few weeks of February, The Trade Desk (TTD 0.71%) is due for a quarterly update soon. Shareholders of the advertising technology company are likely hoping the report can bail them out of dismal performance recently. The stock is down about 74% from an all-time high closing price of more than $139. Even more, the last five years have been atrocious for the stock. During this period, shares are down about 55%.
While performance like this may scare many investors away, this is actually a good time to look at the stock. After all, even though the stock has been crushed, The Trade Desk’s revenue and earnings have performed well over the last five years. Could this be a classic opportunity to “be greedy when others are fearful,” as famed investor Warren Buffett is known for saying?
Image source: Getty Images.
Growth continues, but at a slower pace
The Trade Desk’s third-quarter revenue was $739 million, up 18% year over year. That was a deceleration from 19% growth in Q2 and 26% growth for the full year of 2024.
Still, this isn’t bad performance — at least not the type of performance you’d expect from a company with a stock that has lost about three-fourths of its value. The reality is that The Trade Desk’s underlying business is actually performing quite well. In fact, management noted in its third-quarter update that customer retention stayed above 95%, extending a streak that has now lasted 11 consecutive years.
Further, the Trade Desk business momentum is actually better than it looks. The company is up against a tough comparison due to big political spending in 2024. When adjusted to exclude political spend, the Trade Desk’s third-quarter 2025 revenue actually grew 22% year over year, as customers continue to ramp up their ad spend on the company’s new AI (artificial intelligence)-powered programmatic ad-buying platform, Kokai.
“The momentum continues to be fueled by new product innovations we’ve launched across our Kokai platform,” said CEO Jeff Green.
Further, the company has been repurchasing a meaningful amount of its shares. In its third-quarter update, The Trade Desk announced an additional $500 million share repurchase authorization, after using $310 million to repurchase shares during Q3 alone.
A demanding valuation
What has caused the stock to perform so poorly? An extraordinarily high valuation. Even after the stock’s recent huge beating, shares are trading at a price-to-earnings ratio of about 42 — well above the valuations of some more diversified, fast-growing tech companies like Alphabet, Meta Platforms, Amazon, and Microsoft.
This is a pretty high premium to pay given The Trade Desk’s recent slowdown in top-line growth. And the company’s fourth-quarter top-line guidance doesn’t help either. Management guided for revenue of “at least $840 million,” implying about 13% year-over-year growth. And even when you exclude political spend from the year-ago comparison, this translates to 18.5% growth — a deceleration from the company’s 22% ex-political spend revenue growth in Q3.
Today’s Change
(-0.71%) $-0.26
Current Price
$36.56
Key Data Points
Market Cap
$18B
Day’s Range
$36.09 – $36.69
52wk Range
$34.00 – $125.80
Volume
148K
Avg Vol
13M
Gross Margin
78.81%
Is The Trade Desk stock a good buy today? Given the stock’s high valuation now, I don’t believe there is enough room for error baked into the current stock price. Of course, this doesn’t mean that shares will go down when The Trade Desk reports its fourth-quarter results (there’s no way to know what will happen). But given the company’s decelerating revenue growth, I’d rather wait for a potentially better buying opportunity before building a position in this growth stock.
Of course, if the Trade Desk demonstrates the ability to achieve higher revenue growth rates again, I might reconsider and buy shares of the Trade Desk. For now, however, the company’s recent trend of decelerating growth is concerning — especially when held up against the stock’s pricey valuation.
Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, and The Trade Desk. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.