Should You Buy The S&P 500's Worst-Performing Stock in 2025?

Core Viewpoint - The Trade Desk has experienced a significant decline in 2025, losing 66.2% of its value, making it one of the worst-performing stocks in the S&P 500 Index, raising questions about its future performance and potential recovery in 2026 [1][2]. Financial Performance - The Trade Desk's market capitalization is currently $18 billion, with a current stock price of $36.63, down from a 52-week high of $136.42 [3]. - The company missed revenue estimates for Q4 2024, marking its first miss in 33 quarters, despite a revenue growth of over 22% in that quarter [3][4]. - For 2025, revenue is projected to be $2.89 billion, reflecting an 18.2% growth rate, which is an 8-percentage-point deceleration from 2024 [4]. - Adjusted earnings per share are expected to grow by only 7.2% in 2025, indicating margin compression [4][5]. Challenges Faced - The Trade Desk's performance has been impacted by tough comparisons to the 2024 election year, which typically sees increased ad spending [8]. - The company has invested heavily in overhauling its digital ad data marketplace, introducing new services like Audience Unlimited, which may have contributed to the financial strain [9]. - High executive turnover, including the replacement of key positions such as CFO, COO, and CRO, has raised investor concerns [10]. - Increased competition from larger tech companies, particularly Amazon, poses a significant threat, as Amazon has been aggressively undercutting The Trade Desk's pricing [12][13]. Competitive Landscape - Amazon's demand-side platform (DSP) is seen as a major competitor, leveraging its e-commerce data to enhance ad offerings while offering lower fees compared to The Trade Desk [12][13]. - The Trade Desk's CEO has argued that Amazon's DSP primarily serves its own inventory, suggesting that Amazon may not effectively compete in the broader market [17][20]. Future Outlook - There is potential for a turnaround if The Trade Desk can demonstrate stronger revenue and earnings growth, as current valuations may already reflect existing fears [22]. - The stock trades at 22.1 times this year's adjusted EPS and 18.9 times next year's estimates, indicating a more favorable risk-reward ratio for potential buyers [22][23]. - The company's focus on maintaining neutrality and measuring ad effectiveness across the open internet could position it favorably against competitors in the long run [18][21].