The Trade Desk ($TTD) Just Proved Everyone Wrong — Again.
The Q1 results were a mic drop. The stock still trades as if the bear case has won. It didn’t.
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Introduction
I called the crash a gift. After a 60% rebound, I still see double-digit upside.
Last week, on May 8, programmatic advertising leader The Trade Desk reported its Q1 results, which, to say the least, were well received by investors and Wall Street. Shares gained almost 19% in Friday’s trading session, ended the week 29% higher, and are 60% higher over the last 30 days.
Yet, despite these amazing gains, shares actually remain down 32% YTD. Additionally, shares are still trading over 4% below their February 13 levels, when I last covered them following a 30% post-earnings sell-off, which I called a great buying opportunity. However, from there, shares fell by another 45% (!) to their lowest level since the start of 2023.
Notably, this 45% sell-off, which followed a 30% post-earnings sell-off, was largely driven by poor sentiment, stemming from broader market concerns following Trump’s potentially devastating tariff announcements and the subsequent rise in the risk of a recession. You couldn’t miss it.
However, this impacted TTD quite badly, or at least sentiment toward the company. You see, sentiment toward TTD was already quite poor following the earnings release, as management had missed estimates for the first time and guided for a more challenging year with slowing growth. Add to that the risk of a recession in the U.S., TTD’s largest market, which would almost certainly impact advertising budget and, therefore, also TTD, and you can see how sentiment turned extremely sour.
Yet, those of you who follow my work here closely know how bullish I remained. On multiple occasions, I have called The Trade Desk an absolute bargain and a brilliant buying opportunity. You see, fundamentally, TTD remained in excellent shape. Growth remained strong, even as it slowed; the company remains in excellent financial health, delivering healthy cash flows. Above all, the company is the absolute leader in the highly promising open internet advertising industry, providing it with a massive runway for significant growth over the coming decade.
In other words, the long-term setup isn’t damaged in any way. This is/was nothing but an overreaction to some short-term concerns. I recommend that you not be so short-sighted and look beyond near-term weakness before acting.
Anyway, fast-forward to today, and The Trade Desk delivered a very healthy Q1 report last week, with both top- and bottom-line growth exceeding expectations, driven by healthy underlying trends and strong cash flows. The company continues to execute very well, and the long-term thesis is unchanged – brilliant!
Yet, as I alluded to already, TTD shares continue to trade at relatively low levels, which cannot be explained any longer, even when accounting for some potential economic pain later this year.
So, let me take you through the Q1 results, showing you why the share price jump was more than deserved. Later on, I will update my projections and re-discuss the valuation situation.
Let’s delve in!
