Following a historic sell-off, shares of The Trade Desk are showing tentative signs of stabilization. The plunge was driven more by technical market mechanics and heightened competitive concerns than by deteriorating business fundamentals. As some analysts now highlight the strength of the underlying operations, certain institutional investors are beginning to view the depressed valuation as a potential entry point.
Fundamental Performance Defies Share Price Weakness
Recent analysis presents a stark contrast between the company’s operational health and its stock performance. Research from Baptista Research notes that third-quarter revenue increased by 18% to $739 million. The firm achieved an EBITDA margin of 43% and has maintained a customer retention rate exceeding 95% for eleven consecutive years.
This robust performance is attributed to two key growth drivers:
* Connected TV (CTV): Baptista Research identifies “strong tailwinds” here as more advertising budgets migrate to digital streaming platforms.
* The Kokai Platform: This new AI-powered platform is considered a crucial tool for making advertising campaigns more efficient, potentially directing additional spending toward the open internet.
From an analytical perspective, the current share price does not adequately reflect these solid fundamentals.
The Technical Catalyst: A Forced Exodus
The severity of the decline—with shares down approximately 73% from previous highs and over 60% year-to-date—can be largely explained by a specific technical event. In December, the stock’s removal from the Nasdaq-100 index triggered a wave of mandatory selling by passive funds and ETFs that track the benchmark. These technical outflows significantly accelerated the downward pressure, pushing the equity to levels not seen in years.
Recently, the stock has detached somewhat from its lows, closing at $38.31 on Friday. This places it notably above its 52-week low of $30.80, though overall pressure remains elevated.
Should investors sell immediately? Or is it worth buying The Trade Desk?
Institutional Activity and Market Sentiment
Amid the weakness, some institutional buyers have emerged. Polianta Ltd., for instance, established a new position worth approximately $1.56 million during the recent downturn. While a modest sum relative to total market capitalization, this move signals that certain investors see the sharp de-rating as an opportunity.
Conversely, short interest has risen markedly, with around 12% of the free float currently sold short. This reflects persistent skepticism regarding the company’s future trajectory. However, this setup also increases the potential for a short squeeze should the stock begin a sustained recovery, forcing short-sellers to cover their positions.
Navigating a Shifting Advertising Landscape
Broader sentiment in the advertising market has also shifted, with more budgets flowing into the “walled garden” ecosystems of giants like Google and Amazon. This trend has weighed on the perception of independent ad-tech providers such as The Trade Desk. Despite this, the company’s recent financial results indicate that demand for advertising on the open internet remains intact, and its business model has not been structurally damaged thus far.
The Path Forward and Key Milestones
For the coming months, a critical factor will be whether the $35 to $38 area can hold as a stable support zone. If it does, market focus is likely to shift back toward fundamentals and away from technical selling pressures.
Strategically, the company is betting on the wider rollout of its Kokai AI platform, which is expected to deliver significant efficiency gains for advertisers by 2026. Success in leveraging this technology to capture more open internet advertising budgets could re-accelerate growth.
The next clear test will arrive with the fourth-quarter earnings report in early 2026. Management must then demonstrate that competition from large platform companies remains manageable and that its programmatic advertising model continues to hold up. The recent stabilization following the index exclusion is a first step, but not yet a definitive turning point.
Ad
The Trade Desk Stock: Buy or Sell?! New The Trade Desk Analysis from December 28 delivers the answer:
The latest The Trade Desk figures speak for themselves: Urgent action needed for The Trade Desk investors. Is it worth buying or should you sell? Find out what to do now in the current free analysis from December 28.
The Trade Desk: Buy or sell? Read more here...
