How Should You Play The Trade Desk Stock Going Into Q1 Earnings?

The Trade Desk, Inc. TTD will report its first-quarter 2025 results on May 8, after market close.

The Zacks Consensus Estimate for the bottom line in the to-be-reported quarter is pegged at 25 cents compared with 26 cents reported in the prior year quarter. The estimate has been revised downward by 1 cent in the past 60 days. The consensus estimate for total revenues is pinned at $574.3 billion, implying a 16.9% year-over-year decline.

TTD expects revenues to be at least $575 million, indicating 17% year-over-year growth. This includes a minor headwind from lapping the 2024 leap year and lower political ad spend compared to the first quarter of 2024.

TTD beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, with an average earnings surprise of 7.68%. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

What Our Model Predicts for TTD’s Q1

Our proven model does not conclusively predict an earnings beat for TTD this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that is not the case here. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

TTD has an Earnings ESP of -9.45% and a Zacks Rank #5 (Strong Sell). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Trade Desk Price and EPS Surprise

The Trade Desk price-eps-surprise | The Trade Desk Quote

Factors to Focus on Ahead of TTD’s Q1 Earnings

Despite strong demand for its ad-buying platform, the company faced challenges from shifting market conditions and competitive pressures. The intensely competitive nature of the digital advertising industry, dominated by industry giants like Alphabet’s GOOGL Google and Amazon AMZN, continues to put pressure on TTD’s market positioning. Increasing macroeconomic uncertainty and escalating trade tensions remain concerns, as these could squeeze ad budgets.

While Kokai is expected to replace Solimar entirely by the end of 2025, TTD currently maintains two platforms, leading to operational difficulties.

Increasing digital spending in key areas, such as Connected TV (CTV) and retail media, is expected to have cushioned TTD’s topline performance in the to-be-reported quarter. In the fourth quarter of 2024, The Trade Desk reported a record-breaking spend of more than $12 billion on its platform, signaling continued growth in advertiser demand. The shift of advertising dollars to CTV continues to be the major growth driver.

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. Major streaming platforms — Disney, Netflix, Paramount, Peacock, Fox and Max — are investing heavily in programmatic advertising, and many of them have adopted UID2, boosting addressability and precision targeting for advertisers. TTD expects increasing adoption to aid in the expansion of CTV advertising globally.

TTD’s strategic efforts at international expansion, reorganization and structural improvements, with special stress on internal effectiveness and scalability, may have acted as tailwinds.

TTD Stock Plunges

TTD shares have plunged 58.1% in the past six months. It has significantly underperformed the 7.9% decline of its Internet Services industry and the 5.3% decline of the Zacks S&P 500 composite.

Price Performance

The company has underperformed its digital advertising peers, including Alphabet and Amazon and Magnite MGNI. Alphabet and Amazon shares have plunged 9.1% and 11.2%, respectively, in the same time frame. Magnite has lost 9.8% in the past six months. Magnite is a supply-side platform that helps publishers manage and sell their ad inventory across various formats like streaming, online video, display and audio.

Key Valuation Metric for TTD

From a valuation perspective, TTD is quite expensive. The stock is trading at a premium with a forward 12-month Price/Sales of 9.08X compared with the industry’s 4.89X.

Investment Thesis for TTD Stock

The Trade Desk’s strong portfolio and expanding partner base serve as key strengths. TTD is also driving its growth through strategic maneuvers, including full client migration to its Kokai platform, increased CTV and retail media penetration, and a larger push into AI-powered programmatic enhancements.

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.

What Should Investors Do With TTD Stock?

TTD might disappoint with its first-quarter results, considering the company’s dismal share price performance and negative Earnings ESP. With a Zacks Rank #5, investors would be better off if they offloaded this stock from their portfolios. 

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This article originally published on Zacks Investment Research (zacks.com).

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