3 Reasons Why The Trade Desk Is a Screaming Buy Right Now

There are a few stocks out there with incredible potential that trade at a deep discount to the market.

The Trade Desk has been an excellent performer over the years, but has deserved some, but not all, of its 80% sell-off from all-time highs. I've got three reasons why The Trade Desk is a screaming buy right now, and investors should consider loading up on shares before the deal is gone.

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1. A new partner could ignite growth

The Trade Desk operates a buy-side ad platform that automatically bids on an advertiser's behalf for where to place an ad on the internet. The ad could appear on a podcast, a video pop-up, or in a connected TV commercial. There is a huge amount of advertising real estate on the internet, and The Trade Desk is a huge partner in ensuring that ad spend is optimized.

One emerging location that hasn't been affected by ads right now is generative artificial intelligence (AI). There is some debate about whether AI should be able to have ads on it, but the reality is that some of these companies may need to implement ads to turn a profit. The biggest generative AI business right now is OpenAI, the makers of ChatGPT. Recently, there were reports that OpenAI and The Trade Desk were discussing how to implement ads on the platform. This partnership makes sense because The Trade Desk knows how ad buying works, so ensuring these two are aligned from the start is a big deal.

If The Trade Desk can land this partnership, it would be a huge growth boost for the company, as it would be the only marketplace offering ads on generative AI. This could be one of the best spots to advertise on the internet, and would kick-start the growth that The Trade Desk desperately needs to regain.

2. The stock has a dirt cheap valuation

The primary reason The Trade Desk has sold off is due to its growth slowing. In the fourth quarter, The Trade Desk's revenue growth was 14%, but that figure is projected to be 10% in Q1. For a company that's supposed to be at the cutting edge of a massive shift in how advertising is done, this growth rate seems a bit suspect. That's why the market has largely sold off the stock, and it now trades for a dirt cheap 14 times forward earnings.

TTD PE Ratio (Forward) data by YCharts

For reference, the S&P 500 trades for 21.7 times forward earnings, so The Trade Desk's stock has a huge discount to the broader market.

Considering it's still growing at a market average pace of 10% and not being actively disrupted by AI, and is potentially becoming a partner with one of the primary model makers, this discount seems like a gift to investors.

3. The CEO just spent his own money to load up on shares

Nobody is more aware of The Trade Desk's stock price than its CEO, Jeff Green. He recently took action on his stock by purchasing about $150 million worth of shares on the open market. While there may be several reasons for an insider to sell a stock, there's only one reason to buy it. Green is clearly bullish on his company's prospects, and he believes that it's only a matter of time before the stock rises.

I think this trade is a wise move to copy, as The Trade Desk is still positioned to take advantage of the shift to digital advertising. If it can land a deal with OpenAI, the stock could easily double, and that makes for a pretty compelling investment thesis.

Keithen Drury has positions in The Trade Desk. The Motley Fool has positions in and recommends The Trade Desk. The Motley Fool has a disclosure policy.