Key Takeaways:
- The 2-Minute Valuation Model values The Trade Desk stock at $96 per share in 2 years.
- That’s a potential 100% upside from today’s price of $48 per share.
- TTD’s normalized EPS is projected to grow 59.6% over the next three years.
- TTD stock is trading at its lowest P/E multiple in over three years despite strong growth prospects.
- Get accurate financial data on over 100,000 global stocks for free on TIKR >>>
As digital advertising continues its transformation amid changes in consumer privacy and the rise of connected TV, The Trade Desk (TTD) stands out as a leader in the programmatic advertising space.
The Trade Desk provides a self-service platform that helps advertisers and agencies manage their digital campaigns effectively across various channels and devices.
Despite near-term challenges that have compressed its valuation multiple, The Trade Desk still has a strong long-term growth trajectory, with projected earnings acceleration in the coming years.
The recent significant pullback in TTD stock price presents an intriguing opportunity for investors with a longer time horizon.
With a projected annualized return of 41.4% over the next two years, The Trade Desk stock offers substantial upside potential for those willing to look beyond current market volatility.
Here’s our detailed valuation analysis.
Find the best stocks to buy today with TIKR (It’s free) >>>
What is the 2-Minute Valuation Model?
Three core factors drive a stock’s long-term value:
- Revenue Growth: How big the business becomes.
- Margins: How much the business earns in profit.
- Multiple: How much investors are willing to pay for a business’s earnings.
Our 2-Minute Valuation Model uses a simple formula to value stocks:
Expected Normalized EPS * Forward P/E ratio = Expected Share Price
Revenue growth and margins drive a company’s long-term normalized earnings per share (EPS), and investors can use a stock’s long-term average P/E multiple to get an idea of how the market values a company.
Why TTD Stock Looks Undervalued
Forecast
Based on the EPS growth chart, The Trade Desk is projected to experience strong earnings growth over the next few years.
Its normalized EPS is expected to increase from $1.66 in 2024 to $2.65 by 2027, representing a 59.6% growth over this period.
The Trade Desk is expected to experience a brief deceleration in growth in 2025 before reaccelerating in 2026 and 2027.
This pattern is not uncommon in high-growth technology companies as they navigate market cycles and investment phases.
This earnings growth for TTD stock is likely to be driven by:
- Connected TV Expansion: The shift from traditional linear TV to streaming platforms creates significant growth opportunities for programmatic advertising, with The Trade Desk well-positioned as a market leader.
- Unified ID 2.0 Adoption: TTD’s privacy-focused identity solution is gaining traction as an alternative to third-party cookies, potentially strengthening its competitive position in a post-cookie world.
- International Expansion: The Trade Desk continues to grow its presence in global markets, providing substantial runway for continued revenue growth.
- Retail Media Networks: The rise of retail media presents new growth avenues as retailers build advertising platforms on their e-commerce properties.
- AI and Machine Learning Capabilities: Enhanced technological capabilities enable better targeting and campaign optimization, improving ROI for advertisers and enhancing customer retention.
View TTD’s full analyst estimates (It’s free) >>>
Is The Trade Desk Stock a Value Buy?
The Trade Desk has historically traded at an average forward P/E multiple of 56.2x earnings, as shown in the historical P/E chart. The stock has traded as high as 76.6x earnings and is currently near historic lows at 26.8x earnings.
This dramatic compression in the stock’s multiple presents a significant opportunity for investors. The current P/E is more than 50% below its historical average, suggesting the stock may be substantially undervalued relative to its own trading history.
For our valuation, we’ll use a forward P/E multiple of 36x, which is well below the historical average but represents a reasonable expansion from current levels as growth reaccelerates and market sentiment normalizes.
Today, high-quality companies tend to trade at a P/E ratio that’s about 2 times higher than their annual earnings growth. Since TTD is expected to recover to over 20% annual earnings growth, it’s very reasonable that the stock could trade at over 40x annual earnings with improved sentiment.
Fair Value of TTD Stock
Using our 2-Minute Valuation Model and applying a conservative approach:
- Conservative 2027 EPS estimate: $2.65
- Conservative forward P/E multiple: 36x
Expected Normalized EPS ($2.65) * Forward P/E ratio (36x) = Expected Share Price ($96)
The 2-year expected TTD stock price we would get from this valuation is $96 per share.
With TTD stock currently trading at around $48, this implies a potential upside of approximately 100% over the next two years, or an annualized return of about 41.4%.
Keep in mind, this is just a valuation exercise, and we don’t know for sure what the stock’s price will be in the future.
Value stocks quicker with TIKR (It’s free) >>>
What is the Target Price for TTD Stock?
Analysts have an average price target of around $92 per share for TTD stock, indicating they see nearly 94% upside for the stock from its current levels.
Analysts think this ad-tech giant is undervalued today:
Risks to Consider
While our valuation suggests that The Trade Desk has meaningful upside today, investors should be aware of several risks:
- Intensifying competition in the ad tech space
- Potential regulatory changes affecting digital advertising
- Macroeconomic factors impacting overall advertising budgets
- The ongoing industry shift away from third-party cookies
- The stock’s valuation is sensitive to growth expectations
TIKR Takeaway
The Trade Desk presents a compelling opportunity for investors seeking exposure to the growing programmatic advertising market.
With the stock trading at its lowest valuation multiple in years despite strong projected earnings growth, the risk-reward profile appears attractive for those with a two-year investment horizon.
Our analysis suggests a potential 100% return over the next two years, which translates to an impressive 41.4% annualized return.
For investors with conviction in the digital advertising transformation and The Trade Desk’s leadership position, the current valuation offers an attractive entry point.
Is The Trade Desk a buy over the next 24 months? Use TIKR to check the stock’s analyst price targets, growth forecasts, and see if the stock is undervalued today.
Looking for New Opportunities?
- See what stocks billionaire investors are buying so you can follow the smart money.
- Analyze stocks in as little as 5 minutes with TIKR’s all-in-one, easy-to-use platform.
- The more rocks you overturn… the more opportunities you’ll uncover. Search 100K+ global stocks, global top investor holdings, and more with TIKR.
Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
