The Trade Desk Faces Mounting Headwinds from Analysts and Investors

The Trade Desk US88339J1051

The new year has brought a dual challenge for The Trade Desk, with the advertising technology specialist confronting skepticism from both Wall Street analysts and a major institutional shareholder. Recent downgrades from two prominent firms and a slight reduction in stake by a long-term investor highlight concerns that extend beyond recent financial results to deeper structural issues within the competitive landscape.

A regulatory filing with the SEC on Friday revealed that Baillie Gifford & Co. trimmed its position in The Trade Desk during the third quarter of 2025. The firm sold 1,587,519 shares, representing approximately 5.2% of its holding.

Despite this reduction, Baillie Gifford remains a significant anchor investor, retaining 29.1 million shares, or about 5.95% of the company. This move indicates a degree of caution even among steadfast institutional backers. The investment picture on the institutional side, however, is not uniformly negative. Geode Capital Management increased its stake by 52.1% to 12.3 million shares in the second quarter. Furthermore, Norges Bank and Viking Global Investors established new positions valued at roughly $197 million and $193 million, respectively. The net signal is mixed: some investors are buying on weakness, while others are taking profits or de-risking following a steep 68% share price decline over the past twelve months.

A Double Downgrade Driven by Competitive Fears

Analyst sentiment shifted notably on Friday. Citizens downgraded the stock from "Market Outperform" to "Market Perform," also removing its price target. The firm cited several structural headwinds facing the company's core demand-side platform (DSP) business.

Three key competitive pressures were highlighted:

• Generative AI Lowers Barriers: Citizens argues that AI is simplifying user interfaces in programmatic media buying. Features that once differentiated The Trade Desk are becoming easier for competitors to replicate, diminishing the historical advantage provided by its usability and tools.
• Amazon's Growing Threat: Amazon's DSP is seen as benefiting from access to "the industry's largest retail-media dataset." This first-party data provides Amazon with structural advantages in audience targeting and campaign measurement.
• Weakness in the Open Web: Advertising budgets continue shifting toward closed ecosystems, or "walled gardens." Growth in the open web—outside of Connected TV and Digital Audio—remains significantly slower, directly impacting The Trade Desk's primary market.

Citizens also noted pressure on the company's take rate. Amazon is attracting advertisers with lower fees, while The Trade Desk has reportedly offered negotiated rates and incentives to certain clients to retain market share—a strategy that may protect volume but potentially compress margins.

Shortly after, Citigroup followed suit, lowering its rating from "Outperform" to "Market Perform." This marks a palpable cooling of Wall Street's previously warm sentiment toward the adtech stock. These moves follow other adjustments earlier in January: Exane BNP Paribas upgraded its rating to "Hold," while Moffett Nathanson moved from "Sell" to "Neutral," assigning a $39 price target. The overall picture is one of receding euphoria and rising caution.

Share Price Performance and Technical Context

Shares of The Trade Desk closed at $36.55 on Friday. This represents a modest weekly gain of just over 3%, but a decline of approximately 4% over the past 30 days. The long-term performance is stark: the stock is down more than two-thirds over a twelve-month period, trading nearly 70% below its 52-week high of $118.90.

From a technical perspective, the stock is trading slightly above its 50-day moving average of $35.20, but remains well below its 200-day moving average of $48.53. This suggests the overarching downward trend has not yet been broken.

Operational Performance Outpaces Stock Weakness

The current skepticism follows a year where operational performance was stronger than the steep stock chart decline implies. The weak phase began with the Q4 report in February 2025, when the company missed Wall Street revenue forecasts, triggering sustained selling.

Since then, operations have stabilized. For the third quarter of 2025 (reported November 6, 2025), The Trade Desk exceeded both revenue and profit expectations:
* Earnings per share: $0.45 (consensus: $0.44)
* Revenue: $739.43 million (consensus: $719.11 million)

This represented year-over-year revenue growth of 17.7%. The board also authorized a new $500 million share repurchase program. Despite these figures, the narrative is currently dominated by competition. As Amazon's DSP gains market share, The Trade Desk has shown flexibility in its once-rigid fee structure to remain attractive. In December 2025, the company also trimmed less than 1% of its roughly 3,900 workforce—a small but noticeable step toward efficiency.

The bottom line is an ambiguous picture: a company that is operationally growing and profitable, yet operating in an environment of intensifying competition where its once-clear advantages are being questioned.

Outlook: Forthcoming Earnings and Strategic Initiatives

The next significant test is imminent. The Q4 2025 report, expected in early February 2026, is likely to be the most important short-term catalyst for the stock. Analysts project full-year 2025 earnings per share of approximately $1.06. Crucially, investors will be looking for The Trade Desk to pair solid numbers with a convincing response to competitive concerns.

Regarding valuation, Citizens estimates the stock trades at about 11.2 times its projected 2027 EBITDA—roughly in line with comparable peers. The firm views the current risk-reward profile as "balanced," meaning the shares are neither clearly undervalued nor obviously overpriced, provided competitive pressure from Amazon remains high and near-term catalysts are scarce.

One potential catalyst for 2026 is the OpenAds initiative, unveiled on January 6, 2026. Backed by publishers including BuzzFeed, the Guardian, and Hearst, the project aims to reinvigorate the open web and offer advertisers attractive alternatives to closed platforms. However, its rollout is scheduled throughout the year, limiting its immediate revenue contribution. For investors, the key focus in early February will be the extent to which these strategic projects are reflected in the company's forward guidance and key metrics.

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