After stellar performances in 2023 and 2024 that resulted in a two-year gain of 84.5%, the Nasdaq Composite fell as low as 17,303.01 on March 13 -- a drop of 14.2% drop from the high of 20,173.89 it set on Dec. 16. With that downturn exceeding 10%, the index officially entered correction territory. Although the Nasdaq Composite has ticked up a bit over the past few weeks, it is still about 10% lower than its previous high.
Whether it will slide again from here or not in the near term is, of course, anyone's guess. However, historically, many stock market corrections have been followed by strong market recoveries. According to data from Clearnomics and Standard & Poors, as analyzed by Covenant Wealth Advisors, markets on average fall from peak to bottom for five months and then recover in an average of four months. While we can't assume past performances will predict future results, we can take note of common trends.
In that light, now may be the right time to invest in high-quality, financially sound companies that possess strong competitive moats and that are trading at discounted valuations. One such stock is The Trade Desk (TTD -4.35%). Its shares are down by nearly 52% in 2025 and are off by 60.2% from the all-time high they touched in December.
There are plenty of reasons why this sharp pullback could be viewed as having created an attractive entry point for long-term investors who can tolerate some short-term volatility.
NASDAQ: TTD
Key Data Points
Temporary setback
The Trade Desk's fourth-quarter results proved disappointing as revenue missed both analysts' consensus estimates and management's guidance numbers. CEO Jeff Green attributed that top-line miss to execution missteps during a company reorganization in December that included assigning clear roles and responsibilities, altering the reporting structure, and emphasizing internal effectiveness and scalability.
Once the company addresses these execution issues, the likelihood of resuming its growth trajectory remains high.
Multiple tailwinds
The Trade Desk is an independent demand-side platform (DSP) that helps advertisers optimally place their advertisements across various content platforms. In 2024, the company saw nearly $12 billion of ad spending on its platform -- more than 1% of the $1 trillion global advertising industry market. Hence, there is significant room to grow in this market.
Connected television is the company's fastest-growing advertising segment, accounting for a revenue percentage in the high 40s in the fourth quarter. With the ongoing shift of viewership from linear television to streaming, the share of connected TV advertising in the company's revenue mix is set to grow rapidly in the coming quarters.
Unlike major competitors such as Alphabet and Amazon, which have their own ad inventory and operate "walled gardens" in an effort to keep clients' spending within their ecosystems, The Trade Desk does not own any ad inventory. This allows it to focus solely on placing ads in a manner that is most beneficial and optimal for advertisers based on factors such as price and audience targeting.
Since it has no conflicts of interest, The Trade Desk's operations seem more transparent and objective than the "walled garden" competitors, which helps it sustain its clients' trust. CEO Jeff Green expects Google to eventually exit the open internet due to rising antitrust issues and regulatory pressures. He expects that will open up new opportunities for the Trade Desk.
With its focus on objectivity, The Trade Desk has also been building an exceptionally strong retail data environment, enabling advertisers to better understand conversion rates and the impact of their ad spending on consumers' actions.
The Trade Desk also sees huge growth opportunities in the audio channel, which CEO Jeff Green described as "still the most on-sale corner of the open internet." Many leading digital audio players have already adopted the company's Unified ID 2.0 (UID2) technology, which does not rely on cookies for ad targeting.
Finally, The Trade Desk was also an early adopter of artificial intelligence (AI) technologies. In 2023, it launched Kokai, its AI-powered media buying platform that enables clients to act using better data and signals, leading to a high return on their ad spending.
Strong Financials
The Trade Desk's revenues rose 26% to $2.4 billion in 2024. The company also reported an adjusted EBITDA margin of over 41% and cash flow exceeding $630 million in 2024. The Trade Desk also boasts a strong balance sheet, with $1.9 billion in cash and short-term investments and negligible debt.
Valuation
The Trade Desk is trading at about 11.4 times sales, lower than its historical price-to-sales ratio of 22.9. While the company's price-to-earnings multiple of 72.2 looks rich, it is still far lower than its five-year average of 125.2. Considering the powerful tailwinds that it should experience and its lower-than-usual valuation, The Trade Desk is a smart buy now.
