Core Viewpoint - The Trade Desk is a strong business in the advertising industry but is not currently a compelling investment due to competitive pressures, execution challenges, and high valuation [2][14]. Group 1: Business Performance - The Trade Desk has a history of consistent growth, having delivered over 30 consecutive quarters of revenue beats until late 2024, when it reported its first revenue miss in over eight years [3][4]. - In Q2 2025, revenue increased by 19% year over year, indicating resilience in a challenging advertising market [4]. - Customer retention remains above 95%, and advertisers are increasing their use of The Trade Desk's platform, supported by innovations like Kokai that enhance campaign effectiveness [5][4]. Group 2: Competitive Landscape - The advertising ecosystem is rapidly changing, with Amazon emerging as a significant threat, boasting over $50 billion in annual advertising revenue and a partnership with Netflix that enhances its CTV inventory access [8]. - Competitors like Alphabet and Meta dominate the digital ad market, leveraging AI to improve targeting and ROI for advertisers, creating a challenging environment for The Trade Desk [9]. - The opportunity in CTV and retail media remains substantial, but The Trade Desk must prove its unique value proposition to maintain relevance [10]. Group 3: Valuation Concerns - The Trade Desk trades at approximately 60 times earnings and about 9 times sales, indicating a high valuation that assumes strong growth and competitive advantages [11]. - High multiples can be justified with consistent outperformance, but with reemerging execution risks and intensifying competition, the stock offers little margin for error [12]. - Investors may face modest returns if multiples compress, necessitating exceptional performance from The Trade Desk to justify current valuations [12]. Group 4: Future Considerations - Potential positive developments for The Trade Desk include demonstrating measurable improvements in campaign performance through Kokai and achieving a more attractive entry price that enhances the risk-reward profile [15].
The Trade Desk Is a Great Company, But I'm Not Buying the Stock Yet