TTD

We rate Trade Desk, Inc. (TTD) as a Reduce with a composite score of 42.5/100 at a current price of $24.91. The quantitative profile shows weakness across multiple dimensions, suggesting limited upside potential and elevated risk of underperformance relative to peers over the next 12 months.

The rating is primarily driven by strength in quality (65th percentile) and value (53th percentile), which together account for the majority of the composite score. Offsetting weakness in momentum (11th percentile) and stability (33th percentile) tempers our overall conviction. We assign a Narrow Moat rating (58/100), High uncertainty, and Poor capital allocation.

Key items to watch: momentum to confirm whether the current price trend has legs; balance sheet deleveraging progress; sustainability of the current growth rate. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

Trade Desk, Inc. holds a top-quartile position (#0 of 50) within the Services sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 42.5/100 places it at rank #3193 in our full 7,333-stock universe. With a $24.0B market capitalization, Trade Desk, Inc. operates at meaningful scale within the Services sector, providing competitive advantages in distribution, procurement, and customer reach.

Revenue is growing at 27%, though momentum at the 11th percentile suggests the market has not yet fully recognized this trajectory. This potential disconnect between fundamental improvement and market recognition could represent an opportunity for patient investors if the growth trend persists.

The margin cascade tells an important story: gross margins of 78% (+18.8pp vs sector) narrow to operating margins of 16% (+12.7pp vs sector) and net margins of 13.0%, yielding a gross-to-net conversion rate of 17%. This conversion rate is typical for the sector, suggesting a standard cost structure without notable efficiency advantages or disadvantages.

At a current price of $24.91, Trade Desk, Inc. is trading near fair value based on current fundamentals. Our value factor score of 53/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 34.6x (a 46% premium to the sector median of 23.7x), EV/EBITDA of 27.5x (at a premium), P/B of 4.7x, P/S of 4.5x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis partially supports given strong quality metrics.

We assign a High uncertainty rating to Trade Desk, Inc.. Key risk factors include elevated market sensitivity (beta of 1.64), significant leverage (128% debt-to-equity), below-average price stability (33th percentile). The wide range of potential outcomes widens our fair value estimate and increases the possibility of permanent capital impairment. Investors considering this name should size positions accordingly and demand a meaningful margin of safety before initiating.

Specific risk factors that inform our assessment include: elevated market sensitivity (beta of 1.64); significant leverage (128% debt-to-equity); below-average price stability (33th percentile). Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 33th percentile and quality factor at the 65th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 78% provide a buffer against cost pressures. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile warrants caution and disciplined position management.

We rate Trade Desk, Inc.'s capital allocation as Poor. Key concerns include suboptimal returns on capital. Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — Trade Desk, Inc. significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, Trade Desk, Inc. receives a Reduce rating with a composite score of 42.5/100 (rank #3193 of 7,333). Our quantitative framework assigns a Narrow Moat (58/100, trend: stable), High uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 41/100.

Our analysis does not support a constructive view on Trade Desk, Inc. at this time. The combination of the current quantitative profile, high uncertainty, and poor capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.