The Trade Desk TTD shares have plunged 34.4% since the company reported fourth-quarter 2024 results on Feb. 12.  The company’s fourth-quarter performance was impacted by slower adoption of its next-generation platform, Kokai, and a significant reorganization that led to increased complexity.

Despite strong demand for its ad-buying platform, the company faced challenges from shifting market conditions and competitive pressures. These factors contributed to a revenue miss, marking the company’s first in 33 quarters despite surpassing earnings expectations.

In the fourth quarter of 2024, TTD reported revenues of $741 million, which increased 22% year over year but missed the Zacks Consensus Estimate by 2.25%

However, TTD shares have appreciated 17.1% over the trailing six-month period, underperforming the Zacks Computer & Technology sector’s return of 9.4% and the Zacks Internet Services industry’s 12.2% rally.

The outperformance can be attributed to a significant increase in digital spending in key areas such as Connected TV (CTV) and retail media.

TTD Beats Sector, Industry

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TTD Expands UID2 Support for Enhanced CTV Advertising

Connected TV remains TTD’s fastest-growing and largest channel. With the continued expansion of programmatic advertising in CTV, the company leveraged Unified ID 2.0 (UID2) for improved precision and addressability, further enhancing its performance in this space.

In the fourth quarter of 2024, The Trade Desk further advanced support for UID2, a privacy-centric identity solution designed to replace third-party cookies and improve the relevance of digital advertising while prioritizing user control and privacy. 

iHeartMedia adopted UID2 to provide its advertising partners with enhanced tools for effective targeting, precise measurement, and accurate attribution, fostering more efficient campaigns. 

Additionally, leading supply-side platforms, including FreeWheel, Index Exchange, Magnite, and PubMatic, integrated the European Unified ID, enabling improved addressability and broader reach across the open Internet in line with evolving privacy regulations.

Robust Partnerships and Client Base Bode Well for TTD

The Trade Desk’s extensive partnerships and growing client base are likely to have driven growth in the fourth quarter. Its network includes industry leaders like Disney DIS, NBCU, Walmart, Roku ROKU, LG, Fox, and Netflix.

Strong momentum across TTD’s two initiatives, namely UID2 and OpenPass, which focus on identity and authentication in the post-cookie era, is expected to have benefited from increased demand for its advertising services in the fourth quarter.

Spotify Technology SPOT, via its extended partnership with TTD, is piloting integrations with OpenPath and UID2 through the Spotify Ad Exchange. This collaboration aims to improve addressability and provide deeper insights into Spotify’s premium ad inventory, which is likely to boost TTD’s service adoption and revenue growth.

Integrations with Disney’s real-time ad exchange, which includes Hulu and Disney+ through TTD’s OpenPath technology, have been a game changer and will likely continue to provide significant growth opportunities in the next quarter as TTD gains more ad inventory.

Roku has adopted UID2 to enhance advertiser targeting precision and enable secure data collaboration through Roku Media, which will likely lead to improved advertising performance and increased demand for TTD’s advertising solutions.

Earnings Estimate Revisions Show Upward Trend for TTD

TTD expects revenues of at least $575 million in the first quarter of 2025. The Zacks Consensus Estimate for first-quarter 2025 revenues is pegged at $575.27 million, indicating a year-over-year increase of 17.1%.

The Zacks Consensus Estimate for first-quarter 2025 earnings is pegged at 31 cents per share, which has decreased by a cent in the past 30 days. The figure calls for a year-over-year increase of 19.23%.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

TTD Trading at a Premium

The Value Score of F suggests a stretched valuation for The Trade Desk at the moment, which makes it a risky bet for risk-averse investors.

The TTD stock is trading at a premium with a forward 12-month Price/Sales of 13.31X compared with the industry’s 5.46X.

Price/Sales F12M

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The Trade Desk: Smart Buy or Risky Bet?

The Trade Desk’s strong portfolio and expanding partner base serve as key strengths. Its Growth Score of A indicates that investors who already own the stock might expect the company’s growth prospects to be rewarding over the longer term.

However, TTD is suffering from macroeconomic uncertainty. The intensely competitive nature of the digital advertising industry, dominated by industry giants such as Google and Amazon, continues to put pressure on TTD’s market positioning.

Growing regulatory scrutiny around data privacy and evolving consumer data practices also threaten to disrupt the established audience-targeting methods.

Furthermore, TTD’s reliance on partnerships with third-party platforms also exposes it to vulnerabilities from changes in these partners’ policies or technologies. Stretched valuation also remains a concern.

The Trade Desk carries a Zacks Rank #3 (Hold), which implies investors should wait for a more favorable entry point to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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