Thinking of Buying the Trade Desk Stock? Here Are 2 Risks to Consider.

Key Points

• Its growth in open-internet advertising depends heavily on how well UID2 gains traction.

• One challenge is competition, which remains intense in the connected TV industry.

• What's more, the company's shares remain pricey despite a recent price correction.

• 10 stocks we like better than The Trade Desk ›

The Trade Desk (NASDAQ: TTD) is one of the most closely watched companies in the advertising technology space. Its platform helps brands and agencies buy digital ads across various channels, including connected TV (CTV), audio, display, and mobile. The company has built a reputation as a disruptor, benefiting from the secular shift away from traditional linear TV and the move toward more automated, data-driven ad buying.

However, even great companies face risks, and investors should carefully weigh these before investing. In The Trade Desk's case, two stand out: ongoing operational challenges that could slow growth, and a valuation that leaves little room for error.

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The Trade Desk faces risks that could impact its long-term growth

On the surface, The Trade Desk looks unstoppable. It continues to win share as advertisers reallocate budgets from traditional channels toward digital and CTV. However, beneath that momentum, the company is facing a few operational hurdles.

The biggest one involves its UID2 identity solution. With third-party cookies being phased out by Google in 2025, The Trade Desk has promoted UID2 as an industry standard to enable targeted advertising while preserving user privacy. Adoption has been broad and partners such as Walt Disney, Fox, Roku, and many publishers have integrated UID2. Still, it's far from guaranteed that UID2 will emerge as the universal replacement. Google has its own Privacy Sandbox framework, and other walled gardens, such as Apple, are unlikely to adopt UID2.

This means The Trade Desk's future growth in open-internet advertising depends heavily on how well UID2 gains traction versus rival identity solutions. If adoption slows or if regulators impose stricter privacy rules, the company's targeting capabilities -- and therefore its value proposition to advertisers -- could weaken.

Another challenge is the competitive intensity in connected TV. While CTV is The Trade Desk's fastest-growing segment, competition is intensifying as streamers like Netflix, Amazon, and Disney ramp up their advertising businesses. These platforms are building in-house tech and are under pressure to maximize revenue per user, which could limit the scale of inventory they make available through third-party demand-side platforms like The Trade Desk. In other words, if major streamers decide to keep more ad buying within their ecosystems, The Trade Desk's CTV runway could narrow.

Internally, the company is undergoing one of the most significant adjustments with significant changes in the senior management team. For example, in the second quarter of 2025 alone , it saw the hiring of a new CFO and a new board member with expertise in data, AI, and advertising. Managing this transition while scaling the business is not an easy task.

Together, these operational challenges may derail The Trade Desk from its historically high growth trajectory.

The stock price isn't a bargain despite the uncertainties ahead

The second red flag that investors need to consider is valuation. Even after a sharp pullback in recent months, The Trade Desk trades at approximately 63 times earnings and nearly 10 times sales. That's an expensive price tag for a company operating in a cyclical industry where growth depends on macro ad spending trends.

To be fair, The Trade Desk has earned its premium multiple. It has consistently grown its revenue , maintained profitability, and adjusted its strategies as the industry has developed -- introducing platforms such as Kokai AI, UID2, and others.

Additionally, it operates in an industry with a global total addressable market (TAM) of nearly $1 trillion . Within this industry, connected TV (CTV) is one of the fastest-growing segments -- an area where the company has invested heavily over the years to capitalize on the tailwind.

But here's the thing. Even if The Trade Desk continues to march ahead, sustaining its current valuation requires near-flawless execution. Any stumble -- whether slower UID2 adoption, increased competition in CTV, or a cyclical ad slowdown -- could trigger a sharp contraction in multiple.

That's the risk of buying in at a premium: The business can do well, but the stock may not if expectations are too high.

What does it mean for investors?

The Trade Desk has undeniable strengths: It's founder-led and well-positioned for the secular shift toward programmatic advertising.

However, it's essential to balance the bullish case with the risks. Operational challenges around identity and CTV competition could complicate execution. And with the stock still trading at a steep valuation, investors aren't getting much of a discount for taking on that uncertainty.

If you're considering buying The Trade Desk stock today, the prudent move may be to wait for a better entry point or clearer signs of UID2's industry dominance before committing your hard-earned capital.

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Lawrence Nga has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Netflix, Roku, The Trade Desk, and Walt Disney. The Motley Fool has a disclosure policy.