The Trade Desk Stock: A Buy for 2025?

The Trade Desk (TTD) stock has taken a significant hit, down approximately 50% from its peak in December 2024. This decline has left investors wondering if TTD is still a buy for 2025. Let's dive into the reasons behind the stock's decline and assess its long-term prospects.



Reasons Behind The Trade Desk's Stock Decline

1. Revenue Miss: In Q4 2024, The Trade Desk's revenue of $741 million missed analyst expectations by around $17 million. This miss was a significant factor in the stock's decline.
2. Guidance Disappointment: The company's guidance for the first quarter of 2025 was also below analyst estimates, indicating potential slower growth.
3. Operational Challenges: The Trade Desk faced temporary disruption due to slower adoption of its new AI-powered ad platform, Kokai, and a sales reorganisation. These challenges contributed to the revenue miss and the subsequent stock price decline.

Long-Term Growth Prospects and Addressing the Revenue Miss

Despite the recent setbacks, The Trade Desk's long-term growth prospects remain intact. The company is well-positioned to benefit from the shift to programmatic advertising, the growth of connected TV advertising, and its strong cash position. To address the revenue miss and ensure continued growth, The Trade Desk is taking several steps:

1. Optimizing Kokai adoption: The company is working to accelerate the adoption of its AI-powered Kokai platform, which has the potential to significantly improve ad targeting and performance.
2. Streamlining sales operations: The Trade Desk is refining its sales processes and organisation to improve efficiency and effectiveness.
3. Expanding into new markets and channels: The company continues to explore new opportunities for growth, such as expanding its presence in connected TV (CTV) and other emerging advertising channels.
4. Investing in innovation: The Trade Desk is committed to continuous innovation, developing new products and features to stay ahead of the competition and meet the evolving needs of its clients.



Reasonable Price Target for 2025

Analysts' current 12-month price targets for TTD range from $95 to $140, with an average target of $125.62. Given TTD's strong fundamentals and growth prospects, a reasonable price target for the stock in 2025 could be higher than the current average analyst estimate. Considering the company's expected growth and the positive analyst sentiment, a reasonable price target for TTD in 2025 could be around $140 to $160 per share. This target range represents a potential upside of approximately 11.5% to 27.5% from the current average analyst estimate.

In conclusion, while The Trade Desk's stock price decline is significant, it is essential to consider the company's strong competitive position, growth catalysts, and the potential for continued market share gains in the digital advertising industry. By addressing the underlying issues and continuing to invest in innovation, The Trade Desk is well-positioned to resume its strong growth trajectory and maintain its leadership in the digital advertising industry. As an investor, it is crucial to stay informed about the company's progress and reassess your position accordingly.