Should Investors Buy The Trade Desk Stock Before Earnings?

Key Points

• Its stock is on the road to recovery after a massive decline.

• The Trade Desk stands out by serving as a neutral, AI-driven ad buying platform.

• Valuations are rising but may still be at a level that could attract new investors.

• 10 stocks we like better than The Trade Desk ›

Many investors will undoubtedly focus on the second-quarter 2025 earnings for The Trade Desk (NASDAQ: TTD). The company's earnings report for the fourth quarter of 2024 prompted a massive sell-off in the stock that led to a decline of almost 70% over a four-month period.

The stock recovered some of its lost value, particularly after the release of earnings for Q1. Still, valuations have also risen again, leading to questions about what will happen after the Q2 report. Knowing that, should investors buy this stock before earnings, or should investors stay on the sidelines until after the report?

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The Trade Desk advantage

The Trade Desk has become one of the leading buy-side digital advertising platforms. The DSP (demand-side platform) leverages data to help advertisers and ad agencies find the platforms where it believes a specific ad will be most effective and facilitates programmatic ad buying.

It has improved the platform since introducing its Kokai ad purchasing platform. Unlike the previous platform, Solimar, Kokai utilizes generative AI and includes attributes such as forecast media budgets, quality reach measurement, and retail measurement data to give users a more holistic and precise approach to ad buying.

Additionally, the Trade Desk serves as a neutral platform. Although Google parent Alphabet also offers a DSP, it directs ad buyers to Google ads. In contrast, The Trade Desk will search for ad space outside of Google, opening customers to a broader array of choices.

Why the focus?

The Trade Desk's approach led to stock price returns of almost 2,800% since its September 2016 IPO. With that, it had beaten revenue estimates for 32 consecutive quarters.

Nonetheless, that came to an end in February when the company reported its earnings for the fourth quarter of 2024 and the full year. This report stood out because the company missed its own revenue estimate for the first time. That sent the stock falling by 30% following the report, and from that point, it lost approximately 50% of its remaining value at its low.

Thus, investors focused heavily on its first-quarter earnings report, which came out in May. In that report, The Trade Desk returned to its usual practice of beating its own estimates, and the stock surged.

Now, the stock sells just below $90 per share as of the time of this writing, placing it close to the middle of its 52-week trading range. For the second quarter of 2025, consensus analyst estimates forecast revenue of $686 million, a 17% annual increase if that prediction holds. That indicates the company will beat its own $682 million revenue estimates in Q2.

Where The Trade Desk stands going into earnings

So far, the stock is up by about 3% over the previous 12 months. However, it experienced a wild ride, as it began the year coming off a two-year bull run that started in late 2022.

When the stock peaked at more than $141 per share late last year, one could argue it was overvalued. Just before the critical Q4 report came out on February 12, the P/E ratio of 157 and the forward P/E of 69 seemed to have priced the stock for perfection.

Now, after coming off its lows in April, the stock remains expensive, though not to the same degree. Its current P/E is around 107, while its forward earnings multiple is at 49, slightly below its 54 average since January 2023.

This will also be the first report since The Trade Desk joined the S&P 500 on July 18. That was bullish since it required all funds that track the index to acquire shares of the Trade Desk. Consequently, it sells near its highest price since the post-earnings sell-off in February, which could make investors hesitant to buy, particularly before the report.

Should investors buy The Trade Desk stock before earnings?

Under current conditions, The Trade Desk stock is likely a buy.

Admittedly, the stock is not cheap, and it could pull back following the Q2 release. Nonetheless, The Trade Desk's recent inclusion in the S&P 500 is a clear bullish sign of its role in its industry. Moreover, its forward P/E ratio is slightly below average, and the company's growth is on track to continue.

If one wants to buy before the report comes out, it might be best to begin taking positions, waiting to invest one's remaining allocation after the report's release. That strategy protects new shareholders from a possible sell-off while giving them exposure should the stock skyrocket after the report.

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Will Healy has positions in The Trade Desk. The Motley Fool has positions in and recommends Alphabet and The Trade Desk. The Motley Fool has a disclosure policy.