Trade Desk Stock is Down 60%. Is It a Buy?

Key Morningstar Metrics for Trade Desk

• Fair Value Estimate: $82.00
• Morningstar Rating: ★★★★
• Economic Moat: Narrow
• Morningstar Uncertainty Rating: Very High

A weak earnings report helped send Trade Desk TTD stock down nearly 60% from lofty levels since the start if the year. The company now faces a worsening environment for advertising.

For investors, the important question is whether this a steep but short-lived stumble worth capitalizing on, or a sign of deeper troubles. “One bad quarter does not define the company’s long-term story,” says Morningstar equity analyst Mark Giarelli.

Why Did Trade Desk Stock Plunge?

Trade Desk’s bad 2025 marks a significant reversal. Its shares surged nearly more than 63% in 2024, following a roughly 60% gain in 2023. However, a combination of a marketwide selloff in technology stocks and issues within the firm sent the stock reeling in mid-February, taking it down to $48.64 per share from $117.53 at the start of the year.

Trade Desk, a digital advertising technology company that helps brands and ad buyers purchase data-driven ads across various channels, “missed guidance for the first time in at least eight years, due to execution missteps from an overly complex internal reporting structure,” Giarelli says. He added that a new user interface for the firm’s buying platform Kokai, which looked “clunky and confusing,” only added to the negative sentiment.

What’s the Outlook for Trade Desk?

Despite recent challenges, Giarelli remains confident that Trade Desk is headed in the right direction. He attributes this quarter’s setbacks to “growing pains” in the company’s transition from operating with a purely demand-side platform to the infrastructural backbone of advertising on the open internet.

Kokai’s suboptimal interface “can be easily improved and does not impact our narrow moat thesis,” Giarelli says. Additionally, the appointment of a new chief operating officer to streamline internal reporting demonstrates that the firm has “identified the problem and is actively working to improve it.”

A key part of this transition is OpenPath, which Giarelli highlights as an essential component of Trade Desk’s evolving strategy. “Trade Desk is looking to make a direct connection with publishers (and their inventory), simplifying the supply chain and removing middlemen like SSPs and ad exchanges,” he says. He believes this could “result in margin expansion and enhancement of Trade Desk’s value proposition because there are fewer actors scraping off the top of a digital advertising placement transaction.”

However, Giarelli says this shift is “not an easy feat.” That success depends on publisher adoption, and “this requires publishers to have the technological wherewithal, ‘know-how,’ and institutional buy-in to this arrangement—where the publisher needs to adopt TTD technology." Without publisher support, the strategy could face hurdles.

The Macroeconomic Risks for Trade Desk Stock

Another issue facing Trade Desk is the worsening economic backdrop, which could send online advertising into a downturn. Advertising and ad tech are “extremely sensitive to the broader economic picture, and if that continues to sour, advertiser budgets could defensively front-run the deterioration,” Giarelli says. A sour macroeconomic picture could “front run this deterioration and pullback in total ad spend, which would negatively impact Trade Desk’s revenue model, which collects a percentage of revenue from total ad spend.”

However, Giarelli also sees a scenario wherein the markets behave efficiently: “If the initial high spenders pull back due to macro uncertainty, there will be a compression in ad pricing.” He notes that in this case, advertisers who previously couldn’t afford the pricing can now “step in to buy the inventory,” acting as a value investor “buying the dip.”

Still, this optimistic scenario hinges on the presence of healthy demand. “If tariffs cause the macro picture to deteriorate further, you could start to see Advertiser B, Advertiser C/D and F all retreat,” Giarelli warns. “This is bad news bears because all ad pricing ‘support’ evaporates at once and no one is wanting to spend (or even nibble), despite there being potentially good deals on inventory.”

How Should Investors Approach Trade Desk Stock?

Giarelli believes investors should expect a “cloud around the name until we see more progress with OpenPath and less negative sentiment surrounding Kokai’s UI.” These issues, combined with uncertainty in macroeconomic conditions that suppress consumer sentiment, could be “problematic in the short term.”

However, Giarelli thinks Trade Desk is still “a moaty business.” He recently upgraded Trade Desk’s economic moat rating from none to narrow. The firm’s competitive advantage stems from its transparency and control over the ad-buying process, he says, qualities that set it apart from competitors. “Most other DSPs are incredibly opaque and less comprehensive in terms of giving advertisers ultimate control over ad buying and decision-making,” he notes. “Most of these competing players are ‘black boxes,’ while TradeDesk is a ‘clear box.’”

Trade Desk Stock Valuation

While Giarelli believes Trade Desk stock is undervalued, it’s in a “penalty box or the next quarter or two.” This caution stems from the recent execution mishaps by management coupled with uncertainty around publishers adopting OpenPath according to Giarelli. With the stock currently trading at $48.64 per share, it’s 41% undervalued compared with its fair value estimate of $82, which puts it in 4-star territory.

The following are highlights of Giarelli’s current outlook for Trade Desk and its stock. The full report and more of his coverage are available here.

Economic Moat

We believe that Trade Desk warrants a narrow moat rating based on intangible assets and switching costs.

We think of the value Trade Desk provides its advertising clients as analogous to automated trading in financial markets. In automated trading, a trader creates complex algorithms to systematically derive a fair value for a group of investments. The trader then systematically buys and sells the investments based on deviations between fair and market value. Similarly, Trade Desk enables advertising clients to adjust targeting factors, like ideal demographics and location, to algorithmically value ad inventory as it becomes available.

Find more of Giarelli’s analysis of TradeDesk’s economic moat here.

Fair Value and Profit Drivers

Our $82 fair value estimate implies an enterprise value equal to 12.4 times our 2025 sales estimate.

In our opinion, the primary drivers of the company’s value are the growth of digital advertising budgets, the shift toward programmatic advertising, the growth of ad-supported streaming television services, international expansion, and the company’s ability to take market share. The digital advertising market is massive, with approximately $700 billion of annual spending today. We expect the market to reach $1.5 trillion by 2034 on the heels of GDP growth and advertisers demanding measurability and programmatic, omnichannel solutions.

Find more of Giarelli’s analysis of TradeDesk’s fair value estimate here.

Risk and Uncertainty

We assign Trade Desk a High Uncertainty Rating. In our view, the expansion beyond traditional demand-side platform responsibilities creates the largest set of uncertainties. The firm aims to become a central platform for supporting digital advertising across the internet, but this shift complicates the firm’s business. At the same time, if OpenPath and VenturaOS initiatives succeed, they could expand margins by removing advertising exchange middlemen from the supply chain. But these products require publishers to plug into Trade Desk’s solutions and we are somewhat skeptical of the timeline in which this can be achieved. Overall, we believe this expansion creates upside potential but could distract management from core competencies and invite retaliation from ad exchanges.

Find more of Giarelli’s analysis of TradeDesk’s risk and uncertainty here.

TTD Bulls Say

• Trade Desk’s proprietary algorithms for identification and real-time ad bidding are perfect solutions, given campaign measurability is a constant focus among advertisers.
• As an unbiased advocate for advertiser budgets, Trade Desk has a structural advantage over less-transparent ad giants.
• If the firm can get widespread adoption of its solutions that simplify the advertising supply chain, it will foster unmatched publisher dependence.

TTD Bears Say

• Most advertising dollars are routed to the ad giants. Firms like Google and Meta have no incentive to work with The Trade Desk since it would compress their ad revenue.
• Convincing publishers to adopt Trade Desk’s solutions like OpenPath and VenturaOS will require considerable technological buy-in.
• Google’s Privacy Sandbox and LiveRamp’s RampID are viable alternatives to the firm’s UID 2.0 identity and consumer behavior tracking solution. The lack of industry adoption of UID2.0 would keep Trade Desk’s data aggregation and mapping costs high.