Trade Desk (NASDAQ: TTD) — an ad technology player that helps companies buy digital ads across publishers – recently released its Q4 results, with earnings of $0.59 per share on sales of $741 million, compared to the consensus estimates of $0.57 and $760 million, respectively. Furthermore, the company’s outlook was below the expectations and its stock has nosedived following the earnings release.
TTD stock, with 70% returns since the beginning of 2024, has outperformed the S&P 500 index, up 27%. A continued growth in connected TV advertising growth has boded well for its stock lately. But, if you want an upside with a smoother ride than an individual stock, consider the High-Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.
Trade Desk’s revenue of $741 million in Q4 reflected a 22% y-o-y jump. The company had a strong 95% customer retention rate. It processed a record $12 billion in ad spending, highlighting its growing dominance in the digital advertising marketplace. The company maintained its adjusted EBITDA margin of 47%. Its bottom line of $0.59 per share was up 44% y-o-y. Looking forward, Trade Desk expects its sales to be $575 million and adjusted EBITDA of $145 million in Q1’25, falling short of the consensus estimates of $582 million and $193 million, respectively.
Turning to TTD stock, the recent volatility isn’t new to it. The changes in TTD stock over the recent years have been far from consistent, with annual returns being considerably more volatile than the S&P 500. Returns for the stock were 14% in 2021, -51% in 2022, 61% in 2023, and 63% in 2024.
In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is considerably less volatile. And it has comfortably outperformed the S&P 500 over the last four-year period. 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.
Given the current uncertain macroeconomic environment around rate cuts and ongoing trade wars, could TTD face a similar situation as it did in 2021 and 2022 and underperform the S&P over the next 12 months — or will it see a strong jump? At its current levels of under $90, TTD stock is trading at 18x trailing revenues, lower than the stock’s average P/S ratio of 28x over the last five years. While the Q4 miss and weak outlook explain some valuation multiple contraction, we believe the current level is excessively discounted, with potential headwinds already priced into the stock.
While TTD stock looks like it has some room for growth, it is helpful to see how Trade Desk’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.
| Returns | Feb 2025 MTD [1] |
Since start of 2024 [1] |
2017-25 Total [2] |
| TTD Return | 3% | 70% | 4317% |
| S&P 500 Return | 0% | 27% | 170% |
| Trefis Reinforced Value Portfolio | -1% | 22% | 726% |
[1] Returns as of 2/13/2025
[2] Cumulative total returns since the end of 2016
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
