After a 50% Crash, This Tech Stock Is a Tremendous Value

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12 hours ago

The Trade Desk stock was crushed on its first earnings miss in eight years.
However, the market opportunity is massive and continues to grow.
The Trade Desk is undervalued historically, and its results are excellent.
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Streaming viewership surpassed the combined total of broadcast and cable viewership for the first time ever in May 2025. This is a years-long trend that has seen streaming viewership catapult 71% over the past four years -- even as broadcast and cable viewership dropped 21% and 39%, respectively.
Investors should be asking themselves which companies are likely to benefit significantly from the shift of broadcast and cable viewers to streaming services. The Trade Desk (NASDAQ: TTD) is one of them, and its stock is on sale.
If you're not entirely sure exactly what The Trade Desk does, here it is in a nutshell. The Trade Desk software is a Demand Side Platform, or DSP. This means that it executes programmatic advertising purchases on behalf of its clients.
It works like this: When a website, streaming service, social media platform, or other digital service has ad space to sell, it sends out a bid request. The DSP responds in real time with a bid based on preset criteria for its client's ad campaign. The ad then instantly appears. The Trade Desk adds value to its service by providing its clients with a wealth of useful data.
The programmatic ad market is already massive and continues to grow rapidly. Sources estimate that 91% of digital advertising and at least 56% of total global advertising is programmatic. For perspective, global advertising spending is expected to hit $1 trillion this year.
As shown below, programmatic advertising spending is expected to reach $299 billion this year in the U.S. alone and is projected to increase to $414 billion over the next few years.
The Trade Desk is poised to benefit greatly, and stockholders should be rewarded handsomely over the long haul.
The Trade Desk stock slumped after it missed its earnings estimates for the first time in eight years in the fourth quarter of 2024; however, the sell-off is considerably overdone. The fall has caused several valuation metrics to dip well below historical averages. For instance, the company's price-to-sales ratio (a common metric to value high-growth technology companies) is 82% off its five-year average:
The ratio drops under 13 on a forward basis. The market is pricing The Trade Desk like a distressed business, but it is far from that status.
The earnings miss in Q4 2024 was disappointing. However, sales still grew 22% year over year to $741 million in the quarter and 26% for the full year, eclipsing $2.4 billion. The Trade Desk has since reported encouraging Q1 2025 results. Growth accelerated to 25%, with sales reaching $616 million year over year. Operating income nearly doubled over the prior year, going from $28.7 million to $54.5 million.
The company is also on firm financial footing, with $1.7 billion in cash and investments on hand, and current assets of $4.9 billion, compared to $2.7 billion in current liabilities. Common stock of $386 million was also repurchased during the quarter. When a company buys back its stock, the number of shares available decreases, making existing shares more valuable.
In short, The Trade Desk is growing rapidly, in great financial shape, and considerably undervalued, making it look like a great buy for investors right now.
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Bradley Guichard has positions in The Trade Desk. The Motley Fool has positions in and recommends The Trade Desk. The Motley Fool has a disclosure policy.
After a 50% Crash, This Tech Stock Is a Tremendous Value was originally published by The Motley Fool