Trade Desk Stock To $40?
Trade Desk (TTD) stock has jumped 5.0% during the past day, and is currently trading at $52.49. Our machine-driven multi-factor assessment suggests that it may be time to reduce exposure to TTD stock. We are primarily concerned current valuation and a price of $40 may not be out of reach. We believe there is not much to fear in TTD stock given its overall Strong operating performance and financial condition. But given its Very High valuation, the stock appears Relatively Expensive.
Below is our assessment:
| CONCLUSION | |
|---|---|
| What you pay: | |
| Valuation | Very High |
| What you get: | |
| Growth | Very Strong |
| Profitability | Strong |
| Financial Stability | Very Strong |
| Downturn Resilience | Weak |
| Operating Performance | Strong |
| Stock Opinion | Relatively Expensive |
TTD stock has jumped meaningfully recently and we currently find it relatively expensive. While this may feel like an opportunity, there is significant risk in relying on a single stock. On the other hand, there is a huge value to a broader diversified approach we take with Trefis High Quality Portfolio. Let us ask you this: Over the last 5 years, which index do you think the Trefis High Quality Portfolio outperformed – the S&P 500, S&P 1500 Equal Weighted, or both? The answer might surprise you. See how our advisory framework helps stack the odds in your favor.
Let’s get into details of each of the assessed factors but before that, for quick background: With $26 Bil in market cap, Trade Desk provides a self-service cloud platform for buyers to create, manage, and optimize data-driven digital advertising campaigns internationally.
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[1] Valuation Looks Very High
| TTD | S&P 500 | |
|---|---|---|
| Price-to-Sales Ratio | 9.6 | 3.2 |
| Price-to-Earnings Ratio | 61.9 | 24.0 |
| Price-to-Free Cash Flow Ratio | 34.6 | 20.7 |
This table highlights how TTD is valued vs broader market. For more details see: TTD Valuation Ratios
[2] Growth Is Very Strong
- Trade Desk has seen its top line grow at an average rate of 24.5% over the last 3 years
- Its revenues have grown 23% from $2.2 Bil to $2.7 Bil in the last 12 months
- Also, its quarterly revenues grew 18.7% to $694 Mil in the most recent quarter from $585 Mil a year ago.
| TTD | S&P 500 | |
|---|---|---|
| 3-Year Average | 24.5% | 5.4% |
| Latest Twelve Months* | 23.2% | 5.2% |
| Most Recent Quarter (YoY)* | 18.7% | 6.1% |
This table highlights how TTD is growing vs broader market. For more details see: TTD Revenue Comparison
[3] Profitability Appears Strong
- TTD last 12 month operating income was $475 Mil representing operating margin of 17.7%
- With cash flow margin of 34.7%, it generated nearly $929 Mil in operating cash flow over this period
- For the same period, TTD generated nearly $417 Mil in net income, suggesting net margin of about 15.6%
| TTD | S&P 500 | |
|---|---|---|
| Current Operating Margin | 17.7% | 18.6% |
| Current OCF Margin | 34.7% | 20.4% |
| Current Net Income Margin | 15.6% | 12.7% |
This table highlights how TTD profitability vs broader market. For more details see: TTD Operating Income Comparison
[4] Financial Stability Looks Very Strong
- TTD Debt was $344 Mil at the end of the most recent quarter, while its current Market Cap is $26 Bil. This implies Debt-to-Equity Ratio of 1.3%
- TTD Cash (including cash equivalents) makes up $1.7 Bil of $6.0 Bil in total Assets. This yields a Cash-to-Assets Ratio of 28.3%
| TTD | S&P 500 | |
|---|---|---|
| Current Debt-to-Equity Ratio | 1.3% | 21.6% |
| Current Cash-to-Assets Ratio | 28.3% | 7.0% |
[5] Downturn Resilience Is Weak
TTD has fared worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.
2022 Inflation Shock
- 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.
- However, the stock fully recovered to its pre-Crisis peak by 4 October 2024
- Since then, the stock increased to a high of $139.51 on 4 December 2024 , and currently trades at $52.49
| TTD | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -64.3% | -25.4% |
| Time to Full Recovery | 695 days | 464 days |
2020 Covid Pandemic
- 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.
- However, the stock fully recovered to its pre-Crisis peak by 7 May 2020
| TTD | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -54.2% | -33.9% |
| Time to Full Recovery | 50 days | 148 days |
But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read TTD Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.
The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – S&P 500, Russell, and S&P midcap. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.