Why Cathie Wood Is Loading Up on This Beaten-Down Stock

Following its Q2 earnings report last Thursday, The Trade Desk (NASDAQ:TTD) saw its stock plunge 38.5% for the week – mirroring February’s sharp drop. As such, Cathie Wood’s ARK ETFs treated the sell-off as a buying opportunity, snapping up just over 738k shares of the advertising company the next day.

Namely, ARK Innovation (NYSE:ARKK) ETF added 535,292 shares, while ARK Next (LON:NXT) Generation Internet ETF bought 203,075 shares. These latest moves mark the seventh straight TTD purchase since early November 2024 (sixth for ARKK), bringing the combined stake in both funds to $113.54 million.

Tesla (NASDAQ:TSLA) remains the top holding in both ARKK and ARKW at 10.56% and 7.94% portfolio weight, respectively. Since its inception, ARKW has returned 807.40% and ARKK 286.53%. But given that TTD stock is down nearly 43% over a one-year period, for two consecutive earnings, should investors follow the lead of these actively managed ETFs?

The Trade Desk’s Business Model

The Trade Desk operates as a real-time bidding platform for ad placements. Through omnichannel, covering display, mobile, video, audio, and digital out-of-home (DOOH) media, clients use the platform to launch, target, and optimize ad campaigns. In turn, Trade Desk charges a percentage-based fee on advertising spend.

In jargon, this is called a demand-side platform (DSP), as the platform effectively unifies ad placement rates from different networks within a single interface. The company also uses machine learning to analyze demographics, interests, and behavior, which then determines the optimal use of clients’ ad inventory.

On its own, DSP sounds exceedingly useful. The trouble is, both Amazon (NASDAQ:AMZN) Ads and Google (NASDAQ:GOOGL) Marketing Platform provide a more accessible alternative within their own enormous ecosystems. This is in addition to Adobe (NASDAQ:ADBE) Advertising Cloud as a part of the subscribers’ package for a wide range of content-editing tools.

And although Amazon Ad Server (rebranded after the Sizmek acquisition) ended at the end of 2024, the company is expanding ad sales on Amazon Prime, together with mid-June’s exclusive partnership between Amazon Ads and Roku (NASDAQ:ROKU) for Connected TV (CTV). In the Trade Desk earnings call, CEO Jeff Green mentioned Amazon twice.

Particularly, in reference to walled gardens and their problematic measurement of their own performance.

“We believe it is in the best interest of every retailer (including Amazon) to have the measurement of the open internet based on something more auditable, more independent and more transparent than what happens today.” Jeff Green, The Trade Desk CEO

This is why Green sees Amazon as more of a long-term partner than a direct competitor. Nonetheless, global investment and capital markets firm Jefferies decided to downgrade TTD stock from Buy to Hold, having slashed TTS price target from $100 to $50 per share.

The main culprit for the downgrade was Trade Desk’s Q3 revenue outlook of 14%. For comparison, Amazon’s ad revenue grew 22% year-over-year in Q2 to $15.69 billion.

The Trade Desk Still Trading Profitably

The Trade Desk has been profitable since 2013, having crossed the first $1 billion revenue milestone in 2021. In 2024, the company generated $2.4 billion. For Q2 2025 ending June, the company reported $694 million in revenue, which is up 19% from the year-ago quarter.

This was more than enough to beat FactSet’s revenue expectation of $685 million, while earnings per share (EPS) forecast remained in line at 41 cents. Interestingly, in the quarter’s presentation deck, the company frames itself as “We are an enabler, not a disruptor.” which runs counter to Cathie Wood’s investing thesis on disruption.

Yet, this should be understood in the light of Amazon relations. Despite the Amazon-Roku CTV partnership, Trade Desk sees it as the fastest-growing channel in the foreseeable future with significant opportunities for international growth, given the expected total advertising TAM of $1 trillion.

However, in addition to Jefferies’ downgrade, Bank of America Securities downgraded TTD stock from Buy to Underperform, slashing the target price from $130 to $55 per share. As we mentioned, the guidance for Q3 is largely to blame, despite guidance projecting at least $717 million.

In other words, Trade Desk’s growing profitability is still expected, but it is no longer considered a premium disruptive stock among some analysts.

TTD Price Targets

Year-to-date, TTD stock is down 54.7%, having lost much of its premium appeal since the all-time high of $139.52 in late 2024. Currently priced at $53.22, the value of TTD stock is nearly halved from the 52-week average of $93.18 per share.

Nonetheless, according to WSJ’s forecasting data, the average TTD price target is now still significantly above the current price level, at $79.97 per share. The bottom outlook is $45, while the TTD ceiling price target is $135 per share.

Judging by Cathie Wood’s renewed TTD stake, this is the right price level to jump in on the DSP business model exposure.

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