Buy or Sell The Trade Desk Stock?

August 8th, 2025 by Trefis Team
TTD: Trade Desk logo
TTD
Trade Desk

The Trade Desk stock dropped 39% on Friday, August 8,  despite delivering strong quarterly results, primarily due to a slight miss on Q3 guidance and the unexpected departure of CFO Laura Schenkein, which appears to have rattled investors. This decline comes after a notable rally, with TTD shares rising nearly 20% over the past thirty days following the company’s inclusion in the S&P 500 index.

After its recent sell-off, the key question is whether TTD stock is a buy at levels of around $55. We believe TTD represents a compelling investment at current levels. This assessment is based on our comprehensive analysis comparing the company’s current valuation against its multi-year operating performance and financial condition. Our evaluation across four key metrics—Growth, Profitability, Financial Stability, and Downturn Resilience—reveals that The Trade Desk demonstrates Strong operating performance and financial health, as detailed in our analysis below.

That said, if you are looking for an upside with a smoother ride than an individual stock, consider the High Quality portfolio, which has outperformed the S&P and clocked >91% returns since inception. Also, see – Fortinet: Buy FTNT Stock At $70, Fast?

How Does The Trade Desk’s Valuation Look vs. The S&P 500?

Going by what you pay per dollar of sales or profit, TTD stock looks very expensive compared to the broader market.

  • The Trade Desk has a price-to-sales (P/S) ratio of 11.1 vs. a figure of 3.0 for the S&P 500
  • Additionally, the company’s price-to-free cash flow (P/FCF) ratio is 35.8 compared to 20.6 for S&P 500
  • And, it has a price-to-earnings (P/E) ratio of 64.4 vs. the benchmark’s 22.6

How Have The Trade Desk’s Revenues Grown Over Recent Years?

The Trade Desk’s Revenues have grown considerably over recent years.

  • The Trade Desk has seen its top line grow at an average rate of 25.8% over the last 3 years (vs. an increase of 5.2% for S&P 500)
  • Also, its quarterly revenues grew 19% to $694 Mil in the most recent quarter from $585 Mil a year ago (vs. 4.3% improvement for S&P 500)

How Profitable Is The Trade Desk?

The Trade Desk’s profit margins are higher than most companies in the Trefis coverage universe.

Does The Trade Desk Look Financially Stable?

The Trade Desk’s balance sheet looks very strong.

  • The Trade Desk’s Debt figure was $344 Mil at the end of the most recent quarter, while its market capitalization is $32 Bil. This implies a very strong Debt-to-Equity Ratio of 1.1% (vs. 23.9% for S&P 500). [Note: A low Debt-to-Equity Ratio is desirable]
  • Cash (including cash equivalents) makes up $1.7 Bil of the $6.0 Bil in Total Assets for The Trade Desk.  This yields a very strong Cash-to-Assets Ratio of 28.3% (vs. 6.7% for S&P 500)

How Resilient Is TTD Stock During A Downturn?

TTD stock has fared worse than the benchmark S&P 500 index during some of the recent downturns. While investors have their fingers crossed for a soft landing by the U.S. economy, how bad can things get if there is another recession? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.

Inflation Shock (2022)

  • TTD stock fell 64.3% from a high of $111.64 on 16 November 2021 to $39.89 on 9 November 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
  • The stock fully recovered to its pre-Crisis peak by 4 October 2024
  • Since then, the stock has increased to a high of $139.51 on 4 December 2024 and currently trades at around $55

COVID-19 Pandemic (2020)

  • TTD stock fell 54.2% from a high of $31.54 on 19 February 2020 to $14.44 on 18 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
  • The stock fully recovered to its pre-Crisis peak by 7 May 2020

Putting All The Pieces Together: What It Means For TTD Stock

In summary, The Trade Desk’s performance across the parameters detailed above is as follows:

  • Growth: Very Strong
  • Profitability: Strong
  • Financial Stability: Very Strong
  • Downturn Resilience: Weak
  • Overall: Strong

The Trade Desk has shown robust performance across key financial metrics. While its current valuation multiple is higher than the broader market, this is typical for high-growth advertising companies. For example, its average price-to-sales ratio over the past four years has been 24x. Although competitors like AppLovin have a higher valuation, trading at 29x revenue, The Trade Desk’s recent stock drop offers a compelling entry point.

Key Risks to Consider

While we believe the fundamentals are strong, it’s crucial to acknowledge the risks. The Trade Desk faces intense competition from companies like AppLovin, and regulatory scrutiny over data privacy and market concentration could impact its business model. The company is also sensitive to economic downturns, which often lead to reduced advertising spending, potentially slowing growth and making its premium valuation harder to justify.

Slowing growth is another concern, with Q2 growth at 19% compared to 25% in Q1. This, along with the departure of its CFO, may be contributing to the market’s current discounting of the stock. Therefore, investors should be prepared for the possibility of the stock falling an additional 20-30% in the short term. Also, see – Buy or Sell TTD Stock?

Despite these challenges, we believe the company’s strong fundamentals and operational performance will prevail. Given the current gap between its valuation multiple and its historical average, we anticipate strong gains for investors with a three- to five-year investment horizon.

Still concerned about the rich valuation of TTD stock? As an alternative, consider the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors. Why is that? The quarterly rebalanced mix of large-, mid- and small-cap RV Portfolio stocks provided a responsive way to make the most of upbeat market conditions while limiting losses when markets head south, as detailed in RV Portfolio performance metrics.

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