The Trade Desk Stock Has Soared in May. Can This Momentum Continue?

In This Article:

Key Points

  • The Trade Desk stock has surged about 50% in May, aided by a strong first-quarter earnings report.

  • The adtech company is taking market share as marketers increasingly turn to programmatic advertising for more agile and effective solutions in an uncertain market.

  • As great as the business is, the stock trades at a steep premium, leaving little margin for error.

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Shares of growth stock The Trade Desk (NASDAQ: TTD) have soared about 50% since May 1. Much of this incredible momentum has been driven by the company's impressive first-quarter results. The quarterly figures reassured investors after the company reported worse-than-expected results in the fourth quarter of 2024. For its first quarter, The Trade Desk smashed expectations, reporting revenue far in excess of its own guidance. Furthermore, the company guided for more strong growth in Q2.

But with the stock rising so much and so fast, is The Trade Desk still worth buying at this price?

A person pointing at a bar chart with a line showing a growth trend.
Image source: Getty Images.

What fueled the rebound

The Trade Desk reported revenue of $616 million in Q1, up 25% year over year and ahead of the company's guidance of $575 million. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) came in at $208 million, representing a 34% margin. These figures compare to the adjusted EBITDA of $162 million and an adjusted EBITDA margin of 33% in the year-ago quarter. The company also delivered $0.33 in non-GAAP diluted earnings per share -- a 27% increase compared to the same period last year.

"We're encouraged by the early impact of the strategic upgrades at the company we implemented in Q4, which contributed to our outperformance," said The Trade Desk CEO Jeff Green.

Much of this strength stems from the accelerating adoption of the company's AI-driven ad-buying platform, Kokai, which now powers about two-thirds of client activity. Kokai's advanced tools are helping advertisers improve efficiency and lower costs. According to management, clients that have shifted to the new platform have seen a 42% reduction in cost per unique reach and a 24% drop in cost per conversion.

CEO Jeff Green said in the earnings call that these upgrades were starting to "unlock the next wave of growth." Green emphasized that the business is gaining market share, even amid macroeconomic headwinds, because of programmatic advertising's agility and performance benefits. In addition, strong demand in connected TV and retail media continues to provide tailwinds as brands move budgets away from traditional ad channels.