Is it time to catch the falling knife with The Trade Desk stock?

The Trade Desk has experienced a significant price drop, down 40% on Friday, following a lack of investor conviction. Despite this, the company's fundamentals remain strong, and the price drop is seen as a buying opportunity. The author believes that the company's strong position in the digital advertising industry and its innovative products make it a good investment. The author also mentions that the company's recent rating upgrade justifies their previous caution.

The Trade Desk (NASDAQ: TTD) experienced a significant price drop of over 40% on Friday, August 8, following a lack of investor conviction. The company's shares declined despite reporting strong quarterly results, with the drop attributed to a slight miss on Q3 guidance and the unexpected departure of Laura Schenkein as CFO [1]. This sell-off follows a substantial rally, with TTD shares climbing nearly 20% over the past thirty days after the company's addition to the S&P 500 index.

Despite the recent price drop, the company's fundamentals remain robust. Piper Sandler has lowered its price target on TTD stock to $64.00 from $65.00, maintaining a Neutral rating [1]. The company's current valuation stands at $43.19 billion, with a P/E ratio of 104.8x, reflecting high growth expectations [1]. Analysts at Stifel lowered their price target for TTD from $95 to $90, maintaining a Buy rating, while Evercore ISI adjusted their target from $90 to $80 but kept an Outperform rating [1]. BTIG, on the other hand, raised its price target from $79 to $97, also maintaining a Buy rating, citing improved market conditions and adoption of The Trade Desk’s Kokai platform [1].

The Trade Desk's revenue has grown significantly over the past few years, with an average annual growth rate of 25.8% over the last three years, compared to an increase of 5.2% for the S&P 500 [3]. The company's quarterly revenues rose by 19% to $694 million in the latest quarter from $585 million a year prior [3]. The Trade Desk's operating income over the last four quarters was $475 million, reflecting a moderate operating margin of 17.7% [3]. The company's operating cash flow (OCF) for this timeframe was $929 million, indicating a considerably high OCF margin of 34.7% [3]. During the last four quarters, The Trade Desk's net income totaled $417 million — signifying a moderate net income margin of 15.6% [3].

The company's balance sheet appears extremely robust, with a debt figure of $344 million at the close of the most recent quarter, a market capitalization of $32 billion, and a debt-to-equity ratio of 1.1% [3]. Cash (including cash equivalents) constitutes $1.7 billion of the $6.0 billion in total assets for The Trade Desk, resulting in a strong cash-to-assets ratio of 28.3% [3].

In conclusion, while The Trade Desk's stock has experienced a significant price drop, the company's strong position in the digital advertising industry and its innovative products make it a good investment. The recent rating upgrades from various analysts justify their previous caution. Investors should carefully consider the company's fundamentals and recent performance before making any investment decisions.

References:
[1] https://www.investing.com/news/analyst-ratings/the-trade-desk-price-target-lowered-to-64-from-65-at-piper-sandler-93CH-4180168
[2] https://www.ainvest.com/news/townsquare-earnings-call-conflicting-narratives-digital-advertising-growth-strategies-market-outlook-2508/
[3] https://www.forbes.com/sites/greatspeculations/2025/08/08/the-trade-desk-buy-ttd-stock-now-at-65/