Savvy investors know The Trade Desk (TTD -1.68%) as the leading demand-side platform in the ad tech industry.
The company provides a self-serve, cloud-based platform for managing and optimizing ad campaigns across digital media, and its track record shows how successful the company has been at growing its business and consolidating its leadership. The chart below shows the stock's performance since its 2016 initial public offering.
The Trade Desk has benefited from its exposure to the fast-growing digital advertising industry, but it has also consistently innovated through tools like its cookie-less tracking solution, Unified ID 2.0 (UID2); and Kokai, its artificial-intelligence driven media-buying platform. At the same time, the company has tapped into new digital media channels like connected TV (CTV), or ad-driven streaming, and retail media.
That's why its revenue growth has been 20% or better for every quarter of its publicly traded history except for the second quarter of 2020, during the peak of the pandemic. In 2022 and 2023, even when Alphabet and Meta Platforms saw their growth flatten out, The Trade Desk continued to deliver strong results. It also has had a retention rate of 95% or more every quarter for the last 10 years, showing that customers are overwhelmingly content with the product.
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The Trade Desk dives into CTV
Now, the company is making another bold move. Last week, it announced the launch of its own streaming-TV operating system (OS), Ventura, a move that puts it in direct competition with Amazon and Roku for a fragmented but lucrative TV OS market.
CEO Jeff Green has talked up the opportunity in CTV for years, and now his company is making its biggest play for it yet.
Unlike existing TV OS platforms, The Trade Desk is built by an ad tech company, and the company claims that Ventura will offer a cleaner supply chain for streaming advertising and a better user experience that it says will lead to fewer but more relevant ads.
Ventura also capitalizes on The Trade Desk's own innovations, like OpenPath, its supply-path optimization tool, and UID2 to help advertisers more easily value and price ad impressions across all streaming platforms.
In presenting Ventura, Green said, "This innovation has to come in the OS, and it has to come from a company that brings the objectivity of not owning any streaming TV content."
The company expects Ventura to be deployed by TV manufacturers as early as next year, and it has found support from major streaming platforms like Disney, Paramount, and Tubi, which see the new OS as a step forward for CTV advertising.
The Trade Desk's stock jumped 4% when it announced Ventura, a sign that investors approve of the move, while Roku fell 7% on the news. It will take time for Ventura to gain adoption and move the needle, but it looks set to open a valuable market for the company.
Is The Trade Desk stock a buy?
The stock is expensive, but it has long been that way, and that hasn't stopped it from crushing the S&P 500 over its history.
Currently, it trades at a price-to-earnings ratio of 88, based on adjusted earnings. That puts the stock at risk of a pullback, especially if the economy goes south, but that's not a reason to avoid it.
Instead, the valuation is a reminder that the stock trades at a premium for a reason: The company has a stellar track record, it's the leader of its industry, and it continues to push the envelope with innovations like Ventura.
Investors will have to be patient to see the impact of the new TV OS, but it's the latest evidence that The Trade Desk is the rare stock that can be considered a buy for long-term investors even when it's priced for perfection.
