PDD Holdings Inc., the parent company of the popular online shopping platform Temu, experienced a significant decline in its share price during August, plummeting approximately 22% to $95.55. This downturn was largely attributed to the company’s second-quarter revenue falling short of analysts’ expectations.
For the fiscal second quarter, PDD announced a year-on-year revenue growth of 86%, reaching $13.36 billion. However, this figure fell short of the $14.02 billion consensus estimate projected by analysts. Despite missing revenue targets, the company reported a strong adjusted earnings per ADS of $3.20, exceeding expectations.
While PDD leadership highlighted recent progress, they also acknowledged challenges ahead. The company anticipates slower revenue growth and intensified competition within the market. These concerns have prompted several analysts to adjust their price targets, with Citigroup downgrading the stock from Buy to Neutral. Goldman Sachs also revised its price target from $184 to $165, though maintaining a Buy rating.
Despite the negative market reaction, some analysts remain optimistic about PDD’s long-term prospects. Analyst Ronald Keung argues that the market may be overlooking the strength of PDD’s ecosystem and its clear growth outlook in terms of gross merchandise volume. He also suggests that the company’s shift away from aggressive ad monetization could support more sustainable growth in the future.
Beyond its core business, PDD reported strong growth in its online marketing services revenue, which increased 29% year-over-year during the second quarter. Transaction services revenue saw an even more dramatic surge, growing 234% year-over-year. The company also reported an impressive adjusted operating profit of $4.81 billion, representing a 139% year-over-year increase. As of June 30, PDD held a substantial $39.2 billion in cash reserves.
Despite the positive financial indicators, PDD leadership acknowledges the challenges ahead, particularly the anticipated pressure on revenue growth and profitability. Investors seeking exposure to PDD can do so through the Invesco QQQ Trust, Series 1 QQQ.
For individuals interested in investing in PDD Holdings, whether through buying shares or attempting to short the stock, the process typically involves a brokerage account. Many brokerages offer the ability to buy ‘fractional shares’, allowing investors to purchase portions of stock without buying an entire share, particularly helpful for stocks with high share prices. To bet against a company, investors require access to an options trading platform or a broker who allows ‘shorting’ a stock. This involves borrowing shares to sell, hoping to buy them back at a lower price later. Alternatively, investors can utilize options trading to profit from a decline in share price by purchasing put options or selling call options at a strike price above the current trading price.
According to Benzinga Pro data, PDD has a 52-week high of $164.69 and a 52-week low of $88.01.
