The Trade Desk downgraded by Wedbush amid OpenAI partnership concerns
The Trade Desk (NASDAQ:TTD) was downgraded to ‘Underperform’ by Wedbush on Thursday, with analysts citing concerns that the potential value of a rumored partnership with OpenAI (Unlisted:OPAI) has been overstated.
Shares traded at $29 on Friday afternoon, above the broker’s 12-month price target of $23.
“TTD shares surged ~18% yesterday following reports of a potential partnership to monetize OpenAI’s ChatGPT inventory,” the analysts wrote.
“While we view this as a vital long-term strategic move against AI search cannibalization, the current price action overestimates near-term accretion while ignoring the inevitable DSP dilution and disintermediation risks inherent in partnering with a platform of OpenAI's scale.”
Wedbush estimated that the incremental EBITDA from the potential partnership would reach just $42 million in 2027, implying a roughly 53x multiple on the market value gained during the surge.
“Factoring in our EBITDA expectations from the deal results in a sustained 7x multiple,” the analysts wrote. “As such, we think shares are now overpriced and we maintain our $23 price target and valuation parameters.”
The analysts noted that while the deal could reduce the long-term threat of AI search cannibalization, the near-term financial impact is expected to be limited. Even under aggressive scenarios, Wedbush forecasts that The Trade Desk would capture between $31 million and $77 million in revenue in 2026 and $56 million to $140 million in 2027, representing just 1% to 4% of the company’s projected revenue base. “These figures fail to justify the current double-digit surge in valuation,” the analysts wrote.
Wedbush also highlighted the potential for disintermediation as OpenAI develops its own advertising capabilities. “We expect TTD’s share of that spend to decline over time,” the analysts wrote. “As OpenAI opens its inventory to a broader array of DSP partners to maximize yield, TTD’s win rates will face natural compression.”
Despite the cautious outlook, Wedbush acknowledged strategic positives in the partnership, including access to high-value intent data and reduced long-term risk to TTD’s core business.
However, the analysts highlighted that no deal has been signed. “Relying on rumored internal projections for a pilot-phase product carries significant downside risk if the partnership fails to materialize,” they wrote.
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