History Says the Nasdaq Will Soar: 1 Brilliant AI Stock to Buy Now, According to Wall Street
The Nasdaq Composite has advanced 11% annually during the last four decades, which hints at significant upside in the years ahead.
The Trade Desk is the largest independent demand-side platform in the adtech industry, and the company is leaning into artificial intelligence (AI).
Adtech spending is forecast to grow at 14% annually through 2030, meaning The Trade Desk's earnings can grow even faster if it continues to gain market share.
10 stocks we like better than The Trade Desk ›
Earlier this year, the Nasdaq Composite (NASDAQINDEX: ^IXIC) dropped into market correction territory as investors reacted to the prospect of sweeping tariffs. However, the index has historically rebounded sharply following those incidences, producing an average 12-month return of 21% following corrections since 2010.
More broadly, the Nasdaq Composite has returned 11% annually over the last four decades. That suggests the index is headed much higher in the future.
Buying stock in The Trade Desk (NASDAQ: TTD) is a smart way for patient investors to lean into that possibility. Wall Street's median target price of $84 per share implies 23% upside from the current share price of $68.
Here are the important details.
The Trade Desk is an adtech company that operates the largest independent demand-side platform (DSP), software that helps businesses plan, measure, and optimize data-driven advertising campaigns across digital channels. The company has a particularly strong presence in two of the fastest-growing advertising verticals: connected TV (CTV) and retail media.
The Trade Desk's independent business model -- meaning it does not own media content and has no reason to steer clients toward specific advertising inventory -- is an important advantage. It distinguishes the company from rivals like Alphabet's Google, Amazon, and Meta Platforms, all of which have an incentive to sell their own ad inventory to media buyers, whether or not it's the best option.
Frost & Sullivan analysts recently recognized The Trade Desk as the most technologically sophisticated DSP on the market. The company has been building artificial intelligence (AI) into its software for years. Its 2023 launch of the Kokai platform introduced new AI features that let agencies manage budgets, prioritize ad impressions, and target consumers.
CEO Jeff Green said Kokai adoption was "ahead of schedule" on the first-quarter earnings call, and he thinks all clients will be using the platform by year-end. The Trade Desk is monetizing AI in other ways as well. Its recent partnership with Rembrand will allow brands to use generative AI to create advertising content. That partnership expands its existing generative AI marketplace.
Meanwhile, the company recently reorganized its sales teams to build direct relationships with larger brands rather than working solely with advertising agencies. It also restructured its engineering teams to ship smaller updates more frequently. Those changes have already had an impact on its financial performance. In the first quarter, the Trade Desk reported a 25% increase in sales and a 27% increase in non-GAAP (generally accepted accounting principles) earnings.
Importantly, The Trade Desk stock fell sharply after the company missed its fourth-quarter revenue guidance. Investors worried that increased competition from Amazon could pose a serious problem for the company, but I think the market overreacted. The Trade Desk has built trust with clients due to its independent business model, something that Amazon lacks.
Indeed, Baron Capital analysts believe the competitive landscape remains quite favorable for The Trade Desk, saying in the firm's first-quarter report: "The market has shown a strong preference for independent and objective platforms that are not vertically integrated with media owners. We believe large advertisers will continue to value The Trade Desk's independence, transparency, and neutrality."
With that in mind, The Trade Desk is well positioned to grow its business. Adtech spending is forecast to increase at 14.4% annually through 2030, according to Grand View Research. That should translate into slightly stronger earnings growth as the company continues to gain market share, which makes the current valuation of 40 times adjusted earnings look reasonable.
Before you buy stock in The Trade Desk, consider this:
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Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $658,297!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $883,386!*
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Trevor Jennewine has positions in Amazon and The Trade Desk. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, and The Trade Desk. The Motley Fool has a disclosure policy.
History Says the Nasdaq Will Soar: 1 Brilliant AI Stock to Buy Now, According to Wall Street was originally published by The Motley Fool
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