Why The Trade Desk Stock Skyrocketed Tuesday Morning

Key Points

• The Trade Desk is a leader in the digital advertising field.

• It boasts a long track record of growth.

• The stock will be joining the S&P 500 index on Friday.

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Shares of The Trade Desk (NASDAQ: TTD) charged higher by as much as 14% on Tuesday morning. As of 11:45 a.m. ET, the stock was still up by 9.6%.

The catalyst that sent the digital advertising stock surging was the announcement that the company would be joining one of the premier stock market indexes.

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Meet the newest member of the S&P 500

After the market closed on Monday, S&P Global revealed that The Trade Desk would be joining the S&P 500. The stock will be replacing ANSYS before the market opens on Friday. In the press release that provided details of the reshuffling, S&P Global noted, "S&P constituent Synopsys will acquire ANSYS in a deal expected to be complete on July 17."

Stocks often rise when they initially join a benchmark index because mutual funds and exchange-traded funds based on that index must buy shares of the new component to keep their holdings aligned with it.

Should investors buy The Trade Desk now?

In isolation, the fact that The Trade Desk is joining the S&P 500 is no reason to buy the stock, but there are plenty of other reasons to be bullish about the programmatic advertising leader.

The Trade Desk has a long track record of innovation, as evidenced by the release of Kokai, a platform infused with artificial intelligence (AI) designed to facilitate digital ad buying. That system can access more than 13 million ad impressions each second, providing actionable insights for advertisers within milliseconds.

A rare misstep in transitioning customers to Kokai in the fourth quarter of 2024 caused the company to miss its guidance for the first time in 33 quarters, which sent the stock careening lower. However, the company has since returned to form, generating robust growth in 2025's first quarter.

Trading at 34 times next year's expected earnings, The Trade Desk is significantly discounted relative to its average multiple of 46 over the past three years.

Its ascension to the S&P 500 only solidifies the opportunity, as evidenced by its long track record of growth, industry-leading technology, and discounted price tag. That's why The Trade Desk is a buy.

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Danny Vena has positions in The Trade Desk. The Motley Fool has positions in and recommends Synopsys and The Trade Desk. The Motley Fool recommends Ansys. The Motley Fool has a disclosure policy.