Citizens Lowers Rating on The Trade Desk Citing Intensified Rivalry from Amazon

Citizens recently revised its recommendation for The Trade Desk, moving the stock from a Market Outperform rating down to Market Perform. The brokerage highlighted that increased rivalry among demand-side platforms (DSPs) is constraining the potential upside for The Trade Desk's shares. One key driver of this evolving landscape is generative artificial intelligence (AI), which is simplifying programmatic ad buying and thereby lowering the costs for advertisers to switch platforms. This change undermines the unique advantages that The Trade Desk has historically enjoyed and instead favors DSPs like Amazon, which benefit from extensive proprietary data assets. Amazon represents a formidable competitor due to its possession of the advertising industry's largest retail media data set. This rich data reservoir enhances its ability to target advertisements effectively and measure outcomes with greater precision. As AI reduces operational hurdles across platforms, these data advantages increasingly serve as crucial differentiators. There are also broader structural headwinds affecting the open web advertising space where The Trade Desk operates. Excluding connected TV and digital audio, ad spending on the open web is decelerating as more digital ad budgets shift towards walled garden platforms. Additionally, AI-driven search and AI-powered content overviews are suppressing publisher traffic and monetization, factors that Citizens interprets as challenges to growth in ad impressions and expenditures. Looking ahead, Citizens pointed to several elements that may pressure The Trade Desk's take rates through 2026. Amazon's strategy of offering lower fees to attract advertisers exerts competitive pressure on pricing. In response, The Trade Desk has initiated fee negotiations and is providing incentives to maintain client relationships. Another notable development is the planned rollout in September 2025 of Audience Unlimited, which will introduce tiered, impression-based data pricing ranging from approximately 3.3% to 4.4% of impression costs. While increased adoption of this data offering could bolster revenue, Citizens cautions that greater usage by large existing customers might dilute overall take rates. Currently, The Trade Desk stock trades at roughly 11.2 times estimated EBITDA for 2027, aligning with valuation multiples of peer companies. Given rising competition and a lack of near-term growth catalysts to boost financial performance, Citizens assesses the stock’s risk-reward profile as balanced at prevailing price levels.