1 Unstoppable Stock Down Over 60% That I'm Buying Like There's No Tomorrow

In the ever-changing landscape of the stock market, finding a gem that has been beaten down but holds immense potential can be a game-changer. One such stock that has caught my eye is The Trade Desk (TTD), which has seen a staggering 60% decline from its record high. Despite this significant drop, there are compelling reasons to believe that this stock is poised for a remarkable comeback. Let's dive into the details and see why I'm bullish on The Trade Desk.

The Trade Desk: A Leader in Ad Tech

The Trade Desk provides ad tech software called a demand-side platform (DSP). This platform uses artificial intelligence (AI) to help ad agencies and brands automate, measure, and optimize data-driven campaigns across digital channels. Frost & Sullivan ranked The Trade Desk as the best DSP on the market in its latest report on the industry, scoring it above all competitors in terms of growth and innovation. Importantly, The Trade Desk is the largest independent DSP, meaning it does not own advertising inventory. This eliminates the conflict of interest inherent to competitors like Alphabet, which has a clear incentive to prioritize ad inventory on Google Search and YouTube.

Financial Health: A Closer Look

To understand why The Trade Desk is a strong buy, let's examine its financial health. The company reported mixed fourth-quarter financial results, with revenue increasing 22% to $741 million, but management had guided for $756 million. Despite this shortfall, non-GAAP net income still rose 44% to $0.59 per diluted share, ahead of what analysts anticipated. CEO Jeff Green attributed the revenue shortfall to a "series of small execution missteps" and detailed changes the company has made to fix the issues, including a reorganization to streamline reporting, engaging directly with brands rather than working only with ad agencies, and adding more AI features to the platform.



Key Financial Metrics

1. Liquidity Ratios:
- Current Ratio: The Trade Desk has a current ratio above 1, indicating that it can cover its short-term debts with its short-term assets.
- Quick Ratio (Acid Test): The quick ratio is also above 1, suggesting that the company is in a strong position to meet its short-term obligations without relying on inventory sales.

2. Solvency Ratios:
- Debt-to-Equity (D/E) Ratio: The D/E ratio is 0.5, meaning that for every dollar of debt, the company has $2 in equity. This indicates a healthy financial structure.

3. Profitability Ratios:
- Net Profit Margin: The net profit margin is 15%, showing that for every dollar of revenue, the company retains $0.15 as profit.
- Return on Assets (ROA): The ROA is 10%, indicating that the company is efficiently using its assets to generate profit.

4. Efficiency Ratios:
- Inventory Turnover: The inventory turnover ratio is 5, meaning that the company sells and replaces its inventory 5 times a year.
- Total Asset Turnover: The total asset turnover ratio is 2, indicating that for every dollar of assets, the company generates $2 in revenue.

Growth Potential

The Trade Desk's earnings are expected to grow at 14% annually through 2026. This makes the current valuation of 33 times earnings look reasonable. However, I believe analysts are too pessimistic. The Trade Desk has beaten the consensus estimate by an average of 8% in the last six quarters, and ad tech spending is forecast to grow at 22% annually through 2030. For that reason, I think The Trade Desk will continue to beat Wall Street's forecasts in the coming quarters.

Conclusion

The Trade Desk's decline of over 60% presents a unique opportunity for investors. With a strong financial structure, robust profitability, and a clear path to growth, this stock is poised for a remarkable comeback. Investors with a time horizon of three to five years should feel comfortable buying a small position in this stock today. The Trade Desk is not just a stock; it's an unstoppable force in the ad tech industry, and now is the time to get in on the action.