I think there's a bit of disagreement about whether drag is a joke about femininity in general or transfemininity in particular. It's hard to interrogate the motives of performers who in any case would deny that they are mocking anyone at all, but all the same I think it's easy enough to work out: just ask groups of queer cis men, transmascs, queer cis women, and transfems how they feel about drag and see what the pattern is. Honestly, we don't even need to do that because I think we all already know that transfems have a comparatively very high rate of objection to drag while other queer groups strongly support it. If cis women generally think it's fine and trans women generally don't, that tells you something about who is materially the butt of the joke, doesn't it?
It's an issue complicated by its own history. In Britain at least, modern day drag performers come in a direct line of descent from characters like the Nurse in Romeo and Juliet, that is, a comic relief female character written for a male actor at a time when it was literally illegal for women to perform on stage. I think it's fair to say that characters like that are straight-up misogynstic appropriation. Banning a whole group from performing, then getting the audience to laugh at a man performing a comic caricature of that group, is just misogyny plain and simple. But cultures evolve over time and it isn't the 16th Century any more.
One of the biggest influences on modern-day drag in Britain comes from the USA. First, the popularity of minstrelsy as a crude racist caricature of Blackness performed by white actors in blackface, which was incredibly popular. Over time, the art form was subverted by increasing numbers of Black performers (often touring Britain from the Reconstruction era US) taking on these roles, although the fact that their managers were still overwhelmingly white was obviously a major issue. And then there was the Cakewalk, a dance that evolved on plantations in the Southern US in which Black people mocked the mannerisms of the white people who had enslaved them, which also really took off in Britain in the early 20th Century. (I am of course only covering this from the perspective of its influence in Britain, the history might be quite different in the US itself).
So you have this explicitly misogynstic artform that is influenced by a different, racist downward-punching artform (minstrelsy), then by the subversion of that artform by the targets of the mockery taking on the role of the performer, and then finally by an upward-punching mockery that turns the oppressive nature of minstrelsy on its head. It was inversion upon inversion, satire upon satire, to the point where these performances became meta-performances about the nature of performance itself.
Modern-day drag in Britain came out of the context of this history that played out in parallel on the Music Hall and Variety stage, and led us to a world where the tension between the identities of performer and character is The Point. It is no longer simply, "haha, this is what women are like 🤣" but rather the insincerity of the performance is the performance. Drag is a joke about costume and mannerism as ephemeral - the played-up sense of "I am still just a man under all this" is why people find it funny.
In a world where barriers to cis women performing on stage have been largely lifted, a joke whose point is "look, I'm a woman!" just isn't interesting, even right-wing comedians have to work a bit harder than that these days. But we still live in a world where huge barriers to trans women performing on stage do exist, so a joke saying "look, I'm a [T-slur]!" does still make audiences laugh, and in fact increasingly so as those barriers seem to get higher over time.
I guess this brings us to the one case where drag isn't downward-punching which is when the performer is herself a trans woman. I don't see any problem with this really, it seems the only way that drag can subvert itself, which is always essential to the non-stagnation of any artform. I would, though, like to see more examples of transfem drag performers punching up, flipping drag on its head, perhaps even mocking cis women from below like some kind of anti-Shakespeare. I somehow don't think the wider queer community would like it so much though.
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