Has Trade Desk (TTD) Fallen Far Enough to Look Undervalued?

Trade Desk has seen its share price fall sharply in recent years, which naturally puts the focus on whether the current valuation still lines up with the cash the business is expected to generate. With that kind of reset, the question for you is whether today's US$12.05 price can be supported by Trade Desk's future cash flows.

• Over the last 3 years, the stock has declined 84.2%, which puts the past optimism about Trade Desk's cash generation under a harsh spotlight.
• The business model is built around converting ad spend into recurring platform revenue. The key issue for valuation is how efficiently Trade Desk can turn that revenue into reliable free cash flow over time.
• What if you looked at Trade Desk through its earnings instead? See why Trade Desk's 14.0x P/E tells a different valuation story.

The issue now is whether the intrinsic value suggested by Trade Desk's cash flows can justify where the stock trades after such a steep pullback.

If you are weighing whether Trade Desk's recent declines align with its cash flow potential, it can help to compare that question across 32 high quality undervalued stocks.

Does Trade Desk Look Undervalued on Cash Flow?

The Discounted Cash Flow (DCF) approach weighs Trade Desk's future cash generation against today’s US$12.05 share price. In this model, the business is treated as a platform that converts advertising spend into owner cash over time, rather than a collection of quarterly earnings numbers.

Latest twelve month free cash flow is about US$896.7m, and the projections used in the DCF assume that Trade Desk continues to generate positive free cash flow that broadly grows into the early 2030s. Those forecasts start with analyst estimates, then taper into more modest, model driven growth, which is more typical of a platform that is already scaled rather than one still in its earliest buildout phase. Based on these assumptions, the Discounted Cash Flow (DCF) model indicates an estimated intrinsic value that is substantially above where the stock trades today at US$12.05. Find out what Trade Desk could be worth using our Discounted Cash Flow (DCF) estimate.

The Trade Desk Narrative: What Would Justify Today's Price?

Simply Wall St Narratives for Trade Desk pick up where the DCF puzzle leaves off and explain what would need to happen to growth, margins and earnings for the stock to be worth materially more or materially less than today’s price. They sit on the Community page. Each one ties a fair value estimate to a particular storyline about Trade Desk's possible catalysts and risks so you can track which version of events appears to be unfolding over time.

Community views on Trade Desk are now split around whether recent cost cuts and partnerships set up a recovery or simply mask deeper competitive issues.

Bull case: 11% undervalued

"The continued rapid shift of ad spend from linear TV to connected TV (CTV) is driving significantly faster growth for Trade Desk's highest-margin channel..."

Discover why this Narrative puts Trade Desk at 11% undervalued.

Bear case: 34% overvalued

"Intensifying regulatory scrutiny over data privacy, the continued phase-out of third-party cookies, and stricter identifier restrictions by Apple and Google are expected to undermine Trade Desk's targeting and attribution capabilities..."

Explore why this Narrative puts Trade Desk at 34% overvalued.

Trade Desk’s valuation still hinges on who is steering the ship

Price and cash flows only tell part of the story, because the real drivers are the people making capital decisions, setting priorities and deciding how they are rewarded for it. See who runs Trade Desk and how they are paid.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com