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The Trade Desk Faces Challenges Despite Strong Long-Term Growth

The Trade Desk's 2025 struggles continue with a 36% stock drop. However, with a 54% increase in revenue and a 60% rise in EPS for 2024, analysts suggest it may be undervalued, positioning for exciting long-term potential.

Date: 
AI Rating:   5

Performance Overview
In 2024, The Trade Desk (NASDAQ: TTD) showcased a strong performance with significant growth in revenue and earnings. However, in 2025, the company faced a sharp decline in stock price and an earnings report that fell short of expectations, leading to concerns about short-term growth.

Earnings Per Share (EPS)
The adjusted EPS for 2024 increased by 60% compared to 2022, reflecting a positive trend in profitability. Despite this growth, the earnings report indicated that investor expectations were not met, resulting in stock sell-off.

Revenue Growth
For 2024, total revenues were reported at $741 million, indicating a growth of 54% compared to 2022. However, this figure missed Wall Street expectations by $18 million, raising concerns about the company’s ability to sustain its growth trajectory in the wake of revenue guidance for Q1 2025 being $575 million, which also fell short by $7 million.

Free Cash Flow (FCF)
The report highlights an increase in free cash flow of 38%, which is a promising sign for investors, suggesting robust cash generation despite short-term setbacks.

Market Expectations and Valuation
The decline in The Trade Desk's stock can be attributed to the perceived contraction in its earnings multiple, with a noted P/E ratio drop of 46%. This multiple contraction is generally linked to a decrease in expectations regarding revenue growth and profit margins, indicating that some investor confidence may have been lost despite the company's strong long-term fundamentals.

Long-Term Prospects
While the company is currently experiencing challenges due to management execution affecting short-term performance, it is positioned to benefit from the growing connected TV market. With significant relationships in place and trends favoring digital advertising, The Trade Desk could rebound as it implements its next-gen platforms.

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