As investors strategize for the coming months and the potential landscape of 2026, focusing on stocks that have been heavily discounted due to a poor 2025 performance might prove advantageous. However, such investments must rest on robust analytical foundations rather than mere optimism. Two stocks that have attracted attention in this regard are The Trade Desk and PayPal Holdings.
The Trade Desk: From Ad Tech Prominence to Possible Recovery
Previously regarded as a leading entity in digital advertising technology, The Trade Desk's shares have experienced a sharp decline, losing approximately 70% of their value during 2025. This downturn has landed the company as the worst performer within the S&P 500 index for the year, a disappointing status though potentially setting the stage for a recovery opportunity.
Despite the significant price drop, The Trade Desk remains operationally sound, functioning primarily on the demand side of the advertising market. It facilitates the placement of advertisements across various digital platforms including podcasts, connected television, and online webpages. Competition is fierce in this domain, with major players such as Meta Platforms, Alphabet, and Amazon leveraging their extensive properties and growing their ad businesses as well.
During the third quarter, the company posted an 18% year-over-year increase in revenue, a figure that fell short of some investors' expectations due to a deceleration in revenue growth. An important aspect contributing to revenue fluctuations includes political advertising expenditures, which were particularly elevated in the previous year's third quarter but materially reduced in 2025. This anomaly should be accounted for when evaluating year-over-year comparisons and the prospects for 2026.
From a valuation perspective, The Trade Desk's prospective price-to-earnings ratio for the upcoming year is less than 18, positioning it as an attractively valued growth company. This rare combination of growth potential paired with bargain valuation suggests a potentially compelling investment thesis as the company navigates through its current challenges.
PayPal: Managing Slow Growth Amid Valuation Opportunities
Similarly, PayPal's stock has suffered sizable declines through 2025, falling approximately 30% as of late December. This downturn extends a sequence of underwhelming investor enthusiasm over recent years, partially linked to the company's comparatively modest top-line growth. The firm has generally delivered high single-digit revenue growth in most quarters, a pace that contrasts with rapidly expanding technology sectors such as artificial intelligence.
This growth dynamic displacement has resulted in PayPal's shares trading at an attractive valuation near 10 times projected earnings for the next year. Additionally, management strategies include reinvesting nearly all free cash flow into share repurchase programs. This strategy aims to reduce share count, thereby elevating the diluted earnings per share, a tactic that has contributed positively to the firm's EPS growth rate in recent quarters.
Given this context, if PayPal continues deploying capital efficiently and sustainably enhances its earnings metrics, it could witness a significant stock price rebound in 2026. The confluence of moderate organic growth with aggressive capital return measures may assist the stock in reverting to a more normalized valuation multiple over time.
Considerations for Investors
While The Trade Desk and PayPal exhibit attributes that may support a market comeback, investors should remain cautious. The advertising market and the fintech sector face significant competitive and growth uncertainties. Factors such as fluctuating advertising budgets, changes in consumer behavior, and evolving technology platforms could influence performance outcomes. Additionally, slower-than-expected recovery in revenue growth or inability to sustain earnings improvement may limit stock appreciation.
In summary, The Trade Desk and PayPal offer promising cases for potential market recovery in 2026, grounded in their operational capabilities, valuation characteristics, and strategic financial management. However, investment decisions should weigh known risks and be based on concrete analytical insight rather than speculative hopes.