Should Investors Trade In The Trade Desk?

On the Aug. 31, 2026, episode of The Morning Filter podcast, hosts Susan Dziubinski and Morningstar Chief US Market Strategist Dave Sekera discuss whether investors should throw in the towel on The Trade Desk TTD stock after its huge selloff this year. Here is an excerpt from the show.

What Drove The Trade Desk’s Sharp Decline

Susan Dziubinski: On to our question of the week. As a reminder, if you have a question for Dave, you can send it to us via our email, which is themorningfilter@morningstar.com.

This week’s question comes from a longtime viewer, JC. JC wants an update on The Trade Desk. The stock’s down 64% this year. Morningstar slashed its fair value estimate from a high of around $60 at the start of the year down to about $16 now. Is it time to throw in the towel on this one, Dave?

David Sekera: Before we get to that, let’s just review some of the background here. This has been a sell recommendation a number of times over the past couple of years. In fact, this was one of the most overvalued stocks as compared to our valuation under our entire coverage as recently as December 2024.

And really, the reasoning why we had such a differentiated view from the marketplace, our analysts noted a couple of things. One, just some very high-profile fee disputes with major ad agencies Publicis, WPP, Omnicom; rising competition, they were losing market share; and this was one that we actually were concerned about how AI may disrupt or displace their business. Since December 2024, the stock has now dropped from about $120 per share to now $13 and change.

I took a quick look at our model over the weekend just to see what we’re forecasting. Right now we’re looking for revenue, five-year compound annual growth rate, 3.7%. We’re looking for operating margin expansion to 18.7% by the end of our forecast period, up from 13.2% this year. And to put that in context, it’s not back to its historical highs, but it’s definitely on the high end of the range. Over the past five years, it’s ranged as low as 7.2% up to 20.3%. There might be some more margin expansion potential there, but I think we’re already giving the company some pretty good credit as far as getting back to more normalized, well, actually the high end of normalized, operating region.

Earnings are expected to decline this year. We think that’s the low as far as earnings go, so it’s going to average 12.5% growth thereafter, but yet the stock’s trading at 17.5 times this year’s earnings. Our fair value, $16. I think it’s a matter of trying to understand what a 3-star rating means. I think a lot of times people get confused about what that means. So, if it’s a 3-star-rated stock, as a long-term investor, I would say you should expect results that would be in line with the company’s cost of equity in the model if the company performs in line with our forecasts. Now, in this case, we assign the company Very High Uncertainty, and the cost of equity in our model is 10%.

As far as what to do with the stock today, I can’t give personalized advice. I don’t know what the investor’s situation is. I don’t know how it fits in their portfolio, what they might have as far as gains and losses. But how I think about this type of situation overall, our whole goal here is to look for and invest in those stocks trading at pretty significant margins of safety below fair value. When you are able to buy below fair value, we think that does a couple of things. One, it provides that cushion. So, if our investment thesis is wrong, things don’t pan out the way that we think, there should be less downside, as the stock’s already trading below intrinsic valuation. And if you have any general market selloff, in that case, these stocks should sell off less than the overall market.

In this case, I think this could be a pretty good opportunity to sell, or at least a portion of it, even though it is a 3-star-rated stock, which means you should generate 10% cost-of-equity-type returns. And in this case, you can use those capital losses to offset gains where you might have elsewhere.

I think one of the biggest questions we get from investors today is what to do with some of these stocks that they have hundreds- or thousand-percent type of gains, and they don’t want to have to pay taxes on them. So, maybe sell a portion of it today, watch for any potential upward momentum. If you get that upward momentum, and it moves into 2-star territory, I think that would be a great opportunity to exit at higher levels.

Subscribe to The Morning Filter on Apple Podcasts, or wherever you get your podcasts, and keep up with the latest research from hosts Susan Dziubinski and David Sekera on Morningstar.com.