CHONGQING, CHINA – MAY 06: In this photo illustration, the logo of The Trade Desk, Inc. is displayed … More
Trade Desk (NASDAQ: TTD) – a digital ad technology company that assists businesses in purchasing digital ads across various publishers – saw its stock rise over 10% in extended trading on solid quarterly results and upbeat outlook. The company posted earnings of $0.33 per share on revenue of $616 million, well above the analyst expectations of $0.25 earnings per share and $576 million in revenue.
TTD stock has experienced a substantial decline of nearly 50% since the beginning of the year (as of May 8), significantly lagging behind the S&P 500’s 3.5% decrease over the same period. This underperformance can be attributed to a downbeat Q4 report and a pessimistic outlook shared by the company in February, which negatively impacted investor sentiment. Now, if you’re looking for exposure with reduced volatility, consider the High Quality portfolio, which has outperformed the S&P 500 with over 91% cumulative returns since inception. Separately, see Google’s $1 Trillion Problem: Stock To Crash 40%?
Trade Desk’s revenue of $616 million in Q1 reflected a 25% year-over-year increase. The company maintained a strong customer retention rate of 95%. Additionally, it saw its adjusted EBITDA margin rise by around 100 bps y-o-y to 34%. Higher revenues, clubbed with margin expansion ,resulted in net earnings per share rising 27% year-over-year to $0.33. Looking ahead, Trade Desk expects Q2 2025 revenue of $682 million and an adjusted EBITDA of $259 million (at the midpoint of the provided range), slightly above the consensus estimates.
Recent price fluctuations in TTD stock are consistent with its historical volatility. The stock has demonstrated significant swings in previous years, evidenced by annual returns of 14% in 2021, -51% in 2022, 61% in 2023, and 63% in 2024.
In contrast, the Trefis High Quality Portfolio, consisting of 30 carefully selected stocks, has been significantly more stable. Over the past four years, it has consistently outperformed the S&P 500. Why? Because the HQ Portfolio stocks have historically provided better returns with lower risk than the benchmark index, offering a less turbulent investment journey, as demonstrated by the HQ Portfolio performance metrics.
With ongoing macroeconomic uncertainty, including trade wars and the U.S. Fed keeping the interest rates unchanged, could TTD stock face a downturn similar to 2021 and 2022, underperforming the S&P in the next 12 months? Or will it see a rebound?
At levels of $68 (after market hours), TTD stock is currently trading at a price-to-sales (P/S) ratio of 14x, which is significantly lower than its three-year average of 19x. Given this compressed valuation, coupled with a solid recent quarter and positive outlook, we believe TTD stock is well-positioned for a strong rally.
