The comeback king

The first is The Trade Desk (NASDAQ:TTD). The stock’s down a whopping 71% over the past year, but analysts are predicting a comeback.

For example, at a current price of $35, the average 12-month target price from analysts is $59. There are a dozen with a target price of $70 or higher, reflecting a 100% move from the current price. The highest is from BMO Capital Markets, with a call at $98, and the lowest is from Wedbush at $40.

Let’s address the share price fall first. It’s not really due to a single issue, and it’s important to note the company’s still growing. However, the pace of growth has slowed, prompting some investors to adjust their expectations. Further, it’s facing tougher competition from big tech firms that have deeper pockets to try to grab market share.This remains a risk going forward.

Finally, I’d argue the stock was overvalued in the past, and this adjustment’s healthy in making it a much fairer valuation.

Looking ahead, I think the company could do well as its sector’s growing rapidly. In short, it helps advertisers buy ads across the internet. It’s well-positioned in key areas, such as ads on streaming platforms, which are lucrative right now.

At a broader level, I’ve read that some expect the US economy to outperform this year. If that’s the case, advertising spend should increase, as it’s a very cyclical sector.

Chartering the course

Another idea is Charter Communications (NASDAQ:CHTR). Over the past year, the stock’s down 45%. The telecoms company has struggled due to intensifying competition from fibre builders and 5G providers. This has eroded its pricing power, with reports showing unexpected losses in high-margin broadband subscribers.

In terms of price targets, certain brokers are predicting as high as $450, while other major contributors, including Citi, target over $300. Given that the stock currently trades at $190, there’s potential for serious gains if the forecasts prove accurate. The lowest target I can see is $180 from Morgan Stanley.

Of course, no one has a crystal ball. The brokers and analysts are well-informed, but they can still make mistakes when forecasting a company’s performance.

One key reason being flagged as to why the stock could outperform is that it has heavily invested in upgrading its network. As of 2026, peak capital spending has passed. This should translate to better free cash flow, which can support dividends or debt reduction.

Overall, I think both companies are worth considering for investors as potential turnaround plays for the year ahead.

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However, it has become incredibly volatile recently. After Q1 earnings in January, the share price slumped by 32% in a single day. Then it drifted even lower, reaching a trough in April, before nearly doubling. The Trade Desk seemed to be making a comeback.

Until Friday (8 August) that is, when the stock crashed nearly 39%. That was its worst single-day fall since the advertising technology firm listed in 2016.

This gives me a bit of a dilemma. Should I buy more shares while they’re down? Or sell and move on to a new opportunity?

A strong quarter

The Trade Desk is an advertising tech platform that helps businesses buy digital ads. Customers use its software to bid for ad placements in real time across the internet (websites, apps, streaming TV, podcasts, etc).

For example, a protein powder company is going to get more bang for its buck advertising to people listening to an exercise-related podcast. The Trade Desk uses data and AI to instantly decide which ad to place and at what price.

In Q2, revenue jumped 19% year on year to $694m, outpacing the wider digital advertising market and beating estimates. Adjusted earnings per share of $0.41 matched forecasts. 

Growth in connected TV (CTV) continues to be very strong, helped by partnerships with the likes of Disney, Roku, and Netflix.

Meanwhile, clients that have transitioned the majority of their budgets to Kokai, its new AI-powered platform, are spending more. And all clients are expected to have migrated to Kokai by the end of 2025.

What’s the problem then?

Looking ahead to Q3, however, management warned about the potential impact of tariffs. And it guided for 14% year-on-year growth (a notable slowdown from previous quarters).

Perhaps more seriously, the competitive threat from Amazon seems to be intensifying. The tech giant’s own demand-buying platform places ads across the internet, not just on its own properties (Amazon, Prime Video, Fire TV, Twitch, Kindle et al).

However, CEO Jeff Green argues that the firm’s value proposition is its role as a neutral platform for advertisers to buy across the “open internet.” But he says that Amazon, like Alphabet-owned Google and Meta, are “walled gardens” that have a vested interest in directing ad spend to their own platforms (potentially creating conflicts of interest). 

Green still believes the biggest market in advertising remains the open internet. In other words, he’s not worried, and even views Amazon as a potential partner. 

My move

So, what am I doing? Well, I do fear the competitive threat from Amazon. I fear it might poach some of The Trade Desk’s customers with lower fees, particularly ad sales for commercials in the CTV space.

On the other hand, the stock is now trading at just 25 times next year’s forecast earnings. That’s the cheapest it has ever been.

If The Trade Desk’s problems are temporary, this is an attractively priced growth stock and might be worth considering. However, I’m going to wait a couple more quarters before deciding whether to buy more shares.

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Here’s one Nasdaq share that has lost half its value in a short space of time. I think it’s now worth a look for long-term growth investors.

The Trade Desk

The stock is The Trade Desk (NASDAQ: TTD). This is an advertising technology company that operates a programmatic platform allowing businesses to buy digital ads across various channels.

Programmatic advertising is the automated buying and selling of digital ads in real time. Basically, AI analyses data to place the right ad in front of the right audience at the right time.

This data-driven approach is meant to be much more efficient than the traditional spray-and-pray marketing methods (print newspaper ads, billboards, etc). 

Capitalising on this digital advertising trend, particularly in connected TV, The Trade Desk has grown rapidly. Revenue has jumped from $836m in 2020 to $2.44bn last year. The company is also profitable, achieving a 16% net profit margin in 2024.

However, the stock has been smashed recently — down 53% in just over one month.

Why has it crashed?

There are two main reasons for this collapse. The first relates to this comment from CEO Jeff Green about Q4: “For the first time in 33 quarters as a public company we fell short of our own expectations.”

Specifically, the company reported revenue of $741m rather than the $756m it previously said it would. This unexpected miss spooked investors.

Second, there’s suddenly fear that the US economy is heading for a recession due to uncertainty around President Trump’s tariff policies. If so, companies could pull back on advertising spend, negatively impacting The Trade Desk’s growth. This is a risk here.

Perspective

Taking a long-term view however, I think the stock at $56 now looks attractive. The quarterly miss was clearly concerning, but management says it was self-inflicted and measures have been taken to address the problems.

I think after beating its own guidance for 32 out of 33 quarters, management deserves the benefit of the doubt here.

Moreover, the company puts its total addressable market at $935bn, and still appears to have a strong competitive position. Traditional TV advertising is shifting to streaming platforms, many of which have introduced ad-supported subscription tiers to supplement their traditional paid services.

More advertising slots available on streaming platforms is great news for The Trade desk, which has partnerships with Disney, Netflix, and Roku. So connected TV remains a huge long-term growth market for the company.

Moreover, Q4 revenue of $741m still represented 22% year-on-year growth, which isn’t exactly pedestrian. For this year and next, analysts are currently pencilling in revenue growth of about 20%.

My Foolish takeaway

I own shares of The Trade Desk, so it hasn’t been nice to see them nosedive like this. However, I have no intention of selling and think this may well prove to be a blip.

The stock still isn’t cheap, trading on a forward price-to-earnings (P/E) ratio of 51. However, that is a significant discount to its historical average.

After its 53% crash, I think this growth stock is worth considering.

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Incredibly though, the stock’s still up 168% over five years, showing how well it’s performed historically. Nevertheless, this is a significant setback.

Should I buy more shares on this monster dip? Let’s take a look.

Uh-oh!

The Trade Desk’s platform enables programmatic ad buying, leveraging data to help brands and agencies reach target audiences more efficiently. For example, advertisers use The Trade Desk to place targeted ads on platforms such as Spotify or Roku.

The culprit for yesterday’s epic drop was the company’s fourth quarter. As soon as I read the report’s opening line, I had an ‘uh-oh’ moment: “The Trade Desk also announced an additional share repurchase authorisation, bringing the total amount of authorised future repurchases to $1bn.“

In my experience, a share buyback announcement at the start of a growth company’s report is rarely a good omen. It suggests that management anticipates a share price sell-off and aims to reassure investors by signalling confidence through buybacks.

My fears were confirmed four sentences later when CEO Jeff Green added: “While we are proud of these accomplishments, we are disappointed that we fell short of our own expectations in the fourth quarter.” Oh dear.

The company beat earnings’ forecasts but its own guidance was for quarterly revenue of at least $756m. It came up short, posting $741m.

That might not sound like a big deal. But this was the first time in 33 quarters as a public company that The Trade Desk had missed its own guidance. And Q4 was the Holiday season/US election, a period when retailers were expected to double down on advertising.

For the first time in eight years, we missed the expectations we set, and it was our fault. 

Founder and CEO Jeff Green, Q4 2024 earnings call.

Softish guidance

Management blamed execution missteps in Q4, resulting in slower-than-expected adoption of Kokai, its new AI-powered ad-buying platform. That’s disappointing to hear, as the firm’s data-driven and should be perfectly positioned to harness powerful advances in artificial intelligence (AI).

Looking ahead, it sees revenue increasing by at least 17% ($575m) in Q1. While strong, that’s a slowdown from the 20%+ growth rates investors have grown accustomed to.

This highlights how growth stocks can sell off sharply when they don’t live up to investors’ lofty expectations every single quarter.

My move

Due to its high growth rates, the stock has always been pricey. Heading into the print, it was trading at a premium price-to-sales (P/S) multiple of 25. Even after the drop, the P/S ratio’s still 16.8. The risk with this high valuation is that if growth slows even further this year, there could be another sell-off.

Long term though, I remain bullish. The Trade Desk controls $12bn of ad spend in a $1trn global market. So the opportunity for further growth is massive.

I’ll see how the company gets on this year before committing any further money. But for investors wanting exposure to the fast-growing digital advertising market, the stock could be worth considering after this huge dip.

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However, there are a few common mistakes that I’m very keen to avoid. Here are three of them.

Overtrading

The first is buying and selling shares too often in this account (i.e. overtrading). This can quickly lead to spiralling charges, which would likely erode my long-term returns.

I invest every month in my Stocks and Shares ISA, but I rarely make large purchases for my SIPP portfolio. My holding period for a stock is at least five years, ideally longer. Therefore, buying and selling a lot in my SIPP makes no sense.

My aim is to find some big winners and compound my returns over many years. Interrupting this process by overtrading is counter-productive.

As the late Charlie Munger famously said: “The first rule of compounding: Never interrupt it unnecessarily“.

Selling far too soon

Next, imagine an investor back in early 2010 thought that streaming content online was the future. So they bought shares in an up-and-coming streaming leader called Netflix.

However, after just one year, the value of their holding had more than trebled (a true story!). The stock’s price-to-earnings (P/E) ratio was 70 (also true). According to mainstream financial media, that made the stock ‘overvalued’.

So, while still thinking that streaming was the future and that Netflix was pioneering it, our investor dumped the stock. Let’s assume they invested £1,000 and sold the shares for £3,100. A great return.

However, as is probably obvious, this investor would have left huge gains on the table. Since early 2010, Netflix stock is up 13,450%! By selling far too early, they missed out on more than £130,000 (discounting currency moves).

Obsessing about valuation

The final related mistake I’m keen to avoid is worrying about overvaluation, specifically the P/E multiple.

This ratio is almost entirely useless when evaluating fast-growing businesses in the process of disrupting large established industries (television, in Netflix’s case). It is more appropriate for mature companies optimised for bottom-line profits (earnings).

I’ve never owned Netflix shares, meaning this cherry-picked example is entirely hypothetical. But it still applies to my own SIPP portfolio because I have a handful of growth stocks that have gone up a lot and appear to be conventionally overvalued.

For example, I invested in The Trade Desk (NASDAQ: TTD) at a much lower share price in 2018. The company’s data-powered platform enables major brands and ad agencies to plan, manage, and optimise digital ad campaigns across multiple channels. The fastest-growing areas are connected TV and ad-driven streaming.

The share price is up 325% in the past five years.

This puts the stock on a forward P/E ratio of 89. The main risk with this high valuation is a downturn in the digital ad space, as happened in 2022 when the stock dropped 50%.

However, I’m willing to ride out such downturns and overlook the high valuation because I think the company’s best days are still ahead of it. Net income more than doubled over the first nine months of 2024.

In future, I fully expect data-driven digital advertising to become the norm. As a global ad-tech leader with a smart founder at the helm, I see The Trade Desk’s platform becoming even larger.

The post 3 SIPP mistakes I’m avoiding like the plague! appeared first on The Motley Fool UK.

But as most were panicking, these long-term-minded individuals were able to snap up terrific companies at dirt cheap prices. And today, they’re laughing with plenty of top-notch stocks already up by triple digits from their correction lows.

Capitalising on recovery tailwinds is a proven tactic for unlocking market-beating returns. It’s why these last few years have been some of my most active buying periods. And with the US stock market finally delivering the long-anticipated bounce-back, my portfolios have thrived in 2024.

However, this upward trajectory may be far from finished. And the recovery could continue throughout 2025.

A once-in-a-decade chance?

Small market corrections are fairly common and usually occur once every three years. However, severe prolonged adjustments to stock prices, like in 2022, are far more unusual. In fact, if we exclude the two-month-long Covid crash in 2020, there hasn’t been a major market downturn since the 2008 financial crisis.

That’s because, while there have been a few shake-ups, the economic environment was relatively stable before returning to steady growth with lower interest rates. This is also why 2025 looks so promising. With inflation now under control, both the US and UK central banks have switched back to expansive monetary policy, with the governments following suit.

Lower interest rates mean lower pressure on consumers and more capital available for businesses. And now that all the political uncertainty in the UK and US has cleared up, the stock market looks primed to thrive as we enter what could be another decade of economic prosperity.

Stock markets are forward-thinking

This positive outlook is quite a glass-half-full take on the trajectory of UK and US shares. However, not everyone’s in agreement. And to be fair, there is some justified cause for concern.

It’s important to remember that investors value businesses based on their future potential. As such, there’s a good chance that the expected returns from interest rate cuts in 2025 are already baked into valuations today. And given that some stocks, especially AI-focused enterprises, are now trading at lofty multiples, investor expectations could be a bit overzealous.

Take The Trade Desk (NASDAQ:TTD) as an example. Right now, the shares are trading at a price-to-earnings (P/E) ratio of 190! To be fair, the digital advertising giant’s dominated its industry, achieving jaw-dropping revenue growth while enticing customers to keep allocating more of their marketing budgets to the Trade Desk platform.

For reference, over the last five years, sales and operating profits have grown by an average annualised rate of 31% and 38% respectively.

However, even on a forward basis, the P/E ratio’s still a whopping 88.5, making the valuation hard to justify. Even more so, considering 2025 will have some tough comparables to beat against the 2024 election year, where political ad spending went through the roof.

While there are some lofty premiums floating about, I remain optimistic that 2025 will be another lucrative year for the stock market. But regardless of whether stocks rise or fall, for investors who want to maximise returns, it’s the undervalued companies that could deliver the greatest returns.

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As a result, some exciting opportunities have emerged, including the two firms outlined below. Considering their growth potential and current valuations, I reckon these are some of the best shares to buy right now. 

Market niche 

One of the most exciting companies to emerge over the past couple of years has been the Trade Desk (NASDAQ: TTD). This organisation helps online advertisers manage their content and advertising campaigns.

While it is facing stiff competition from the likes of Amazon and Google, the business has carved out a niche in the market. This has enabled the corporation to grow earnings at a compound annual rate of around 80% since 2015.

However, I think it is unlikely this sort of growth rate is sustainable. Nevertheless, as the global online advertising market continues to expand, I also think the business has tremendous potential over the next few years.

Shares in the company have fallen around 30% since the end of 2021. I can see why some investors might reduce their exposure to the business as competition in the online advertising market increases. Privacy issues could also be a concern for the group. 

Nevertheless, I would buy the stock for my portfolio following this decline as a long-term growth play. The online advertising market is strong and it is only going to expand in the years ahead. This is why I think the company is one of the best shares to buy right now. 

Shares to buy for economic growth

It has never been easier to start a small business. Entrepreneurs have a range of tools available to help them sell products and services online. The companies that help facilitate these transactions could be some of the best shares to buy right now as the economic recovery gains traction. 

Etsy (NASDAQ: ETSY) is one of the leading players in the space. Since 2015, its sales have risen 10-fold as consumers have flocked to its online marketplace, which still has vast potential.

Despite revenues of $2.3bn, the firm is still tiny in comparison to the likes of Amazon, which is over 100 times bigger. 

That said, I cannot take the company’s growth for granted. It is facing increasing competition, and some users are moving away from the platform due to its high commission costs. These headwinds could hold back growth. 

Still, with the stock having fallen 55% from its 2021 high, I think the shares are beginning to offer growth at a reasonable price. Indeed, the stock is currently selling at a 2022 forward price-to-earnings (P/E) multiple of just 38. That is below the firm’s five-year average of around 75. 

With further growth on the horizon, I believe this multiple undervalues the company and its potential. 

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