Undervalued Turnaround Candidates in 2026: The Case for The Trade Desk and PayPal

In the realm of value investing, identifying undervalued companies poised for recovery in cyclical industries requires a blend of financial rigor and strategic foresight. As 2026 approaches, two names stand out: The Trade Desk (TTD) and PayPal (PYPL). Both operate in sectors-digital advertising and payment processing-that are inherently sensitive to macroeconomic cycles. Yet, their Q3 2025 results and strategic initiatives suggest they are not merely surviving the current environment but actively positioning themselves for a robust rebound.

The Trade Desk: A High-Margin Innovator in a Resilient Sector

The Trade Desk, a leader in programmatic advertising, reported Q3 2025 revenue of $739 million, reflecting an 18% year-over-year increase. This growth was driven by its Kokai platform, which enables brands to harness data-driven advertising more effectively. The company's financial discipline is evident in its Adjusted EBITDA margin of 43%, translating to $317 million in operating profit. With no debt and $1.44 billion in cash, The Trade Desk's balance sheet is a fortress, allowing it to reinvest in innovation or return capital to shareholders.

Valuation metrics further underscore its appeal. The Trade Desk's forward P/E ratio of 20.56 and P/B ratio of 6.99 appear undemanding relative to its growth trajectory. Analysts highlight its focus on open internet advertising and partnerships like Unified ID 2.0, which enhance targeting transparency. These innovations position the company to capitalize on a sector expected to benefit from 2026's accommodative monetary policies and rising digital ad spend.

PayPal: A Payment Processor Reclaiming Its Mojo

PayPal's Q3 2025 results were equally compelling. Revenue rose 7% to $8.4 billion, with operating profit hitting $1.5 billion-a 18% margin. Earnings per share of $1.34 exceeded forecasts by 10.74%, driving an 8.48% pre-market stock surge. The company's adjusted free cash flow of $2.3 billion enabled a historic first dividend since 2015, distributing 10% of net income to shareholders.

PayPal's valuation is even more attractive. Its P/E ratio of 11.44 and P/B ratio of 2.79 suggest it is trading at a significant discount to intrinsic value. CEO Alex Chriss emphasized strategic investments in digital wallets, Buy Now Pay Later (BNPL), and agentic commerce, which align with 2026's anticipated growth in mobile payments and AI-driven fraud prevention. Analysts project PayPal's stock could reach $11 by 2030, though 2026 may remain volatile.

Cyclical Tailwinds and Strategic Resilience

Both companies operate in sectors poised for cyclical recovery. Easier global financial conditions and accommodative central bank policies in 2025-2026 are expected to boost consumer and corporate spending. For The Trade Desk, this means higher ad budgets as brands prioritize data-driven campaigns. For PayPal, rising e-commerce adoption and expansion into BNPL services create a dual tailwind.

However, risks persist. Geopolitical tensions and U.S. tariffs could disrupt supply chains, while competition in digital wallets intensifies. Yet, both companies have demonstrated agility: The Trade Desk's Kokai platform and PayPal's PYUSD stablecoin exemplify their ability to innovate amid uncertainty.

Conclusion: A Value Investor's Dilemma

The Trade Desk and PayPal offer distinct but complementary opportunities. The Trade Desk's high-margin model and technological edge make it a compelling long-term play in a sector with durable demand. PayPal, with its low valuation and diversified growth strategy, represents a more immediate turnaround candidate. For value investors, the key lies in balancing these profiles against macroeconomic risks while leveraging their strategic strengths. As 2026 unfolds, both companies could emerge as exemplars of resilience in cyclical industries.