Trade Desk Stock To $26?

Trade Desk (TTD) stock has fallen 5.6% during the past day, and is currently trading at $37.02. Our 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 $26 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:

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Let’s get into details of each of the assessed factors but before that, for quick background: With $18 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.

[1] Valuation Looks Very High

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 23.5% over the last 3 years
• Its revenues have grown 21% from $2.3 Bil to $2.8 Bil in the last 12 months
• Also, its quarterly revenues grew 17.7% to $739 Mil in the most recent quarter from $628 Mil a year ago.

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 $528 Mil representing operating margin of 18.9%
• With cash flow margin of 31.6%, it generated nearly $881 Mil in operating cash flow over this period
• For the same period, TTD generated nearly $439 Mil in net income, suggesting net margin of about 15.7%

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 $376 Mil at the end of the most recent quarter, while its current Market Cap is $18 Bil. This implies Debt-to-Equity Ratio of 1.6%
• TTD Cash (including cash equivalents) makes up $1.4 Bil of $5.9 Bil in total Assets. This yields a Cash-to-Assets Ratio of 24.3%

[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 $37.02

 
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

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.

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