Investing.com -- HSBC downgraded The Trade Desk to Reduce from Hold and lowered its price target for the stock to $20 from $31 in a note on Monday.

Analyst Mohammed Khallouf pointed to a deteriorating relationship with major agency partners, growing competitive pressure, and an unproven AI advertising opportunity, leaving the company facing its most challenging outlook since going public in 2016.

Khallouf told investors that Trade Desk's second-quarter revenue guidance of just 8% year-on-year growth (the slowest since the company's 2016 listing) reflects pressures that go beyond previously flagged structural issues.

"What we failed to appreciate at the time… are the additional second-order impacts on TTD's relationships with its partner global ad agencies," Khallouf wrote, noting that agency partners account for more than 40% of Trade Desk billings.

HSBC said Publicis's decision to curtail use of Trade Desk's platform over transparency concerns was partly a response to a "DSP market that has grown vastly more competitive."

The bank adds that ongoing negotiations between Trade Desk and its agency partners are "unlikely win-win, in our view, given the strengthened agencies' hand," and sees growing downside risks to both ad spend volumes and take rates.

On the AI opportunity, HSBC flagged that OpenAI's launch of a self-service advertising product with a cost-per-click bidding model on May 5 brings the platform "a step closer to the 'Walled Garden' BigTech approach to ads," potentially limiting the scope for a meaningful Trade Desk partnership.

HSBC cut its 2026-2027 revenue estimates by 3%-5% and adjusted EPS by 14%-17%, applying a lower 6.0 times target multiple to its revised 2027 EBITDA estimate of $1.38 billion.