The Trade Desk: Down 75%, But a Reversal May Be Near

Key Points

• Shares of The Trade Desk have collapsed more than 75% since last summer, and sentiment has fallen close to rock bottom.
• The stock’s short interest is now above 11%, creating the conditions for a potential squeeze if momentum can flip.
• With earnings fast approaching and expectations low, the risk-reward setup is looking unusually attractive.

Shares of The Trade Desk NASDAQ: TTD are currently trading around $23, having bounced off the $20 level earlier this month. While that rebound is encouraging, it barely scratches the surface of the damage done in recent months.

The stock remains down about 75% from its 52-week high last August, and down nearly 85% since December 2024, making this one of the more severe downtrends in the large-cap space right now.

For existing shareholders, it’s been a painful ride. But for those of us on the sidelines, the setup is starting to shift from painful to interesting. The big question is whether this is just another short-term, fleeting bounce or the early stages of something more meaningful. There are several reasons to think it might be the latter, so let’s take a closer look.

A Perfect Storm of Negative Sentiment

The biggest driver behind the downtrend has been the rise of artificial intelligence, which has led to concerns that parts of the digital advertising ecosystem could see massive disruption. While it’s undoubtedly a big player in the programmatic ad space, The Trade Desk has nowhere near the resources to weather this, let alone fight it, as others like Alphabet NASDAQ: GOOGL do.

More recently, company-specific issues have added to the pressure. Questions around the fees The Trade Desk is charging its biggest clients have emerged, with several customers flagging concerns. At the same time, broader macro headwinds—including geopolitical tensions linked to Iran—have weighed on advertising budgets and led to lower earnings forecasts.

The result is a stock that has seen relentlessly negative sentiment for some time now, which helps explain why shares of TTD have erased all their gains from the past six years.

Extreme Bearishness Is Creating Opportunity

Perhaps it's understandable why The Trade Desk is now one of the most heavily shorted large cap stocks, with more than 11% of the float sold short. But this is also where the setup gets more interesting.

High short interest alone does not guarantee a squeeze, but it does create the potential for one, particularly if the underlying narrative begins to shift. Look no further than Avis Budget Group NASDAQ: CAR, and the short-squeeze-fueled 584% pop it’s had this month to understand the potential.

At the same time, there’s no denying that expectations for The Trade Desk have been completely reset and are about as low as they could be. Combine that with a valuation that’s becoming increasingly attractive, and you have a situation where the potential downside is significantly limited relative to the potential upside.

Regarding what those expectations could look like, recent analyst sentiment is pointing firmly up. The team at UBS Group reiterated its Buy rating on the stock this week, along with a $31 price target. While that's not at Avis Budget Group levels yet, it's still 30% in targeted upside from current levels.

More importantly, it would go a long way in breaking the multi-month downtrend currently in place.

Meanwhile, the consensus price target suggests an even better scenario, with more than 78% potential upside over the next year.

Early Signs of a Technical Turn

From a technical perspective, there are signs that selling pressure on TTD is already easing. So far this year, the stock has shown a clear willingness to hold the $20 level, which is starting to establish itself as a key support zone. At the same time, its Relative Strength Index reading is moving up sharply from extremely oversold territory, suggesting that the aggressive selling seen in recent months is beginning to fade.

This kind of price action often points to quiet accumulation, where buyers begin to step in before a clear shift in sentiment takes hold. It’s still early to tell, but that pattern is one that bulls will be watching closely. If shares of TTD can continue to build on this bounce and avoid falling back below $20 ahead of next month's earnings report, they could be onto something.

Earnings Could Be the Catalyst

One thing to be mindful of going into the company's Q1 2026 report is that The Trade Desk has delivered headline beats in its last three quarters, suggesting that the business is holding up better than the stock price implies. If the company can keep building on that trend, it could be the impetus needed to force short sellers to reconsider their positions.

Even modestly better-than-expected results could trigger some covering, which in turn would drive prices to the upside and force additional shorts to buy the stock to exit their positions. For now, though, that might be getting too far ahead, given the aforementioned risks.

If The Trade Desk fails to deliver—or reinforces existing concerns around its growth prospects—the downtrend could resume. But with the stock having given up so much ground already, the risk/reward ratio is heavily weighted in favor of the bulls.