The stock market remains expensive despite a recent rally in prices. Many analysts have lowered their earnings forecasts due to trade tensions and economic uncertainty. This has made it hard to find good value stocks.
Sometimes, the best bargains come from companies whose shares have fallen sharply. Short-term problems can create long-term chances for investors. Even if you miss the lowest price, the market usually gives more chances to buy as stocks recover slowly.
One stock worth watching is The Trade Desk (NASDAQ: TTD). Its shares have dropped more than 67% from last year’s peak. As of early June, you can buy shares for about half of that high price. Here’s why this could be a great opportunity.
Why The Trade Desk’s Stock Fell
Two years ago, The Trade Desk launched Kokai, an AI platform to help advertisers improve their campaigns. The platform aims to optimize ad bids, targeting, and measurement. The company keeps adding new features to attract more business.
However, moving customers from the old system to Kokai was slow. This caused problems in the company’s operations and led to missing revenue targets for the first time since 2016. The earnings miss triggered a big sell-off.
The situation worsened when new tariffs were introduced, increasing economic uncertainty. Many expected companies to cut advertising budgets, hurting The Trade Desk’s business.
Still, the company is confident about its future. It has simplified Kokai’s user experience and accelerated the customer transition. By May, two-thirds of clients were using Kokai, ahead of schedule. Strong first-quarter results helped the stock recover somewhat.
The Trade Desk’s Market Potential
Digital advertising spending is huge and growing fast. Marketers will spend nearly $800 billion this year, rising to over $1 trillion by 2030. Most of this goes to giants like Google, Meta, and Amazon.
The Trade Desk offers an alternative by placing ads across many platforms, not tied to one “walled garden.” It has steadily gained market share but still holds a small slice of the digital ad market. Last year, clients spent $12 billion on its platform.
Unlike the big three, which sell their own ad space, The Trade Desk offers more flexibility. It introduced OpenPath, which lets publishers sell inventory directly, cutting out middlemen. It also launched Ventura, a connected-TV operating system, to increase ad inventory.
If Google faces regulatory changes, The Trade Desk could benefit by winning more ad bids. This could help it gain even more market share.
Is The Trade Desk Stock a Good Buy?
The stock trades at about 30 times its expected earnings before interest, taxes, depreciation, and amortization (EBITDA). While this is a premium, strong revenue growth and margin improvements could justify the price.
The Trade Desk faces less regulatory risk than its bigger rivals. This makes its current price attractive for long-term investors, especially since it remains well below recent highs.
Considerations Before Investing
Some experts still see risks due to recent execution issues and economic uncertainty. The company missed revenue forecasts and faced criticism over Kokai’s user interface. Advertising budgets are sensitive to the economy, which could impact revenue.
However, The Trade Desk’s transparent platform gives it a competitive edge. It is rated as having a “narrow economic moat,” meaning it has some protection against competitors.
Overall, the stock appears undervalued by about 40% compared to fair value estimates. Investors willing to accept short-term challenges may find a strong growth opportunity in The Trade Desk.
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