In 2025, it is not easy to find a large-cap stock that has lost more positive sentiment in such a short period than The Trade Desk (TTD 0.83%). The programmatic advertising company’s stock price is down 60% since the beginning of the year. It plunged dramatically following earnings reports released in February and in August.
The severity of the drop probably changes the investment thesis on the stock. As the leading independent self-service platform for buying digital ad space, it offers a competitive advantage over large advertisers like Alphabet or Amazon, which hold biases toward their platforms.
Given the pace of its growth and the severity of its stock decline, investors have likely turned overly pessimistic on the stock, and here’s why.
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What happened to The Trade Desk
This year, The Trade Desk has become a tale of disappointing earnings reports. It started in February, when the stock lost most of its value after missing its own revenue estimate for the fourth quarter of fiscal 2024.
The stock plummeted, but a recovery accompanied by a favorable earnings report the next quarter helped it recover some of its lost value. However, The Trade Desk took another hit after announcing results for the second quarter of fiscal 2025 in August. Concerns about tariffs pressuring large customers and rising competition from the likes of Google and Amazon weighed on the stock.
More recently, investors have found growing dissatisfaction with The Trade Desk’s artificial intelligence (AI) platform, Kokai. A confusing interface and the removal of popular features from the old platform Solimar disappointed both users and investors. It was also unclear whether the company had forced users to adopt Kokai or would still allow them to continue using Solimar, making it more difficult for customers to do business with The Trade Desk.
Fortunately, The Trade Desk has moved to address this concern and has partially removed an unpopular interface from Kokai. The company has also moved to address the worries of investors, reporting that over 70% of client spend is now on Kokai as of the second quarter of 2025.
What the financials say
Nonetheless, the financials continue to point to unappreciated strength in The Trade Desk, though revenue growth has decelerated. In the first half of 2025, revenue of over $1.3 billion increased by 22% compared to the same period in 2024. While still a robust growth rate, the rise in revenue was down from the 27% increase it experienced in the previous year.
During that time, costs and expenses almost kept pace with revenue growth. Additionally, a much higher income tax expense resulted in $141 million in net income for the first half of the year, rising 21% yearly.
Indeed, the projected revenue increase of 14% for Q3 is down from prior quarters and could point to continued struggles with the platform. Nonetheless, analyst estimates point to 17% revenue growth in both 2025 and 2026, indicating the company has offered overly conservative guidance. Also, the aforementioned 60% decline in the stock price likely prices in the slowing revenue growth.
Still, the lower stock price has probably helped abate prior concerns about The Trade Desk’s valuation. Although its 56 P/E ratio may seem high, it is down from 150 at the beginning of the year, placing its earnings multiple at a multiyear low. Moreover, with rising earnings pushing its forward P/E ratio down to 26, one could argue The Trade Desk is falling into value stock territory.
Buy The Trade Desk stock
Given The Trade Desk’s valuation and the opportunity in the digital ad market, the stock looks increasingly like a buy.
Admittedly, the market had likely overvalued The Trade Desk stock at the beginning of the year. As a stock priced for perfection, it had nowhere to go but down as it missed a revenue target in Q4 and dealt with customer dissatisfaction over the Kokai rollout.
Nonetheless, The Trade Desk still stands at the forefront of an opportunity in the digital ad market. As it continues to address some of the competitive and operational concerns, its low valuation and continued growth appear to have made this stock a more compelling buy.
Will Healy has positions in The Trade Desk. The Motley Fool has positions in and recommends Alphabet, Amazon, and The Trade Desk. The Motley Fool has a disclosure policy.