The Trade Desk and PubMatic Shares Surge: Navigating the Ad Tech Rally

The stocks of The Trade Desk (TTD) and PubMatic (PUBM) have surged in early 2025, driven by improving consumer sentiment, strong Q3 2024 financial results, and strategic moves in the connected TV (CTV) advertising space. However, both face headwinds that could test their long-term growth. Here’s what investors need to know.

The Trade Desk: Riding CTV Growth, But Facing Execution Hurdles

The Trade Desk’s dominance in CTV advertising—powering campaigns in 90 million U.S. households—has been a key driver of its valuation. In late 2024, its 27% year-over-year revenue growth (Q3) and partnerships with streaming giants like Sonos initially fueled optimism. Analysts at The Motley Fool recently highlighted TTD as a "screaming buy," citing its undervalued status (P/E of 30 based on adjusted earnings) and resilience during past ad downturns.

However, challenges have emerged:
- Kokai’s rocky launch: TTD’s new ad-buying interface faced criticism for a "periodic table-style UX" that confused users. While the platform’s adoption remains low, its OpenPath programmatic tool has shown promise, boosting publisher revenue by 39% for partners like Vizio.
- Competitive pressure: Rivals like AppLovin and Google’s DV360 are encroaching on TTD’s CTV turf, while publishers grumble about OpenPath’s 5% fee.

PubMatic: Betting on SSP Growth and CTV’s Rise

PubMatic’s Activate platform, which connects buyers to premium publisher inventory, has become a critical tool for advertisers fleeing TTD’s operational stumbles. In Q4 2024, PubMatic’s CTV revenue hit 20% of total sales, growing 37% year-over-year. Its Q1 2025 guidance calls for revenue of $61–$63 million, though it faces headwinds from a major DSP buyer’s revised auction strategy and foreign exchange headwinds.

Recent wins include:
- AI-driven tools: PubMatic’s Creative Category Manager (using generative AI) boosted political ad revenue in 2024 and is now expanding to other verticals.
- Global partnerships: The company now works with 80% of the top 30 streaming publishers, including Disney+ Hotstar and TCL.

Common Catalysts and Risks

Why they’re rising now:
- CTV’s golden age: CTV ad spend is projected to hit $120 billion by 2025, with both companies positioned to capture growth.
- Valuation discounts: TTD trades at 28x sales, while PubMatic’s 3x sales multiple suggests investor skepticism about its near-term prospects.

Risks to watch:
- Macroeconomic pressures: Rising interest rates and trade tensions could dampen advertiser budgets.
- Regulatory hurdles: Data privacy laws (e.g., California’s CPRA) could complicate ad targeting.

Conclusion: A Cautious Bull Case

Both stocks offer compelling long-term opportunities in the CTV boom, but investors should tread carefully. The Trade Desk’s valuation and operational execution will determine its rebound potential, while PubMatic must prove it can offset its DSP-related headwinds with Activate’s growth.

For now, TTD’s undervaluation and PubMatic’s SSP dominance make them worth monitoring, but wait for Q1 results (due May 8) to confirm if the rally has legs. With CTV ad spend booming and programmatic tools evolving, this pair could be ad tech’s next big story—if they navigate execution risks.

Final Take: Buy the dip, but keep a close eye on Q4 2024 fallout and CTV adoption rates.