PDD Holdings (PDD), the parent company of Temu and a Chinese e-commerce giant, has seen its stock face significant fluctuations. In early Thursday trading, the stock tumbled after reporting third-quarter earnings and sales that fell short of expectations. This comes after a period of remarkable growth last year, driven by the success of its international discount shopping site Temu. However, this year has presented a different scenario, with the stock down 20% year-to-date before the earnings report.
Key Metrics and Insights
In a news release, PDD stated that it earned an adjusted 18.59 yuan per American depositary share (ADS) on sales of 99.35 billion yuan, or $13.7 billion, for the September-ended quarter. Analysts had projected adjusted earnings of 19.58 yuan per ADS on sales of 102.87 billion yuan. Revenue growth in the quarter was 44%, a slowdown from the 86% and 131% growth seen in the second and first quarters respectively.PDD Vice President of Finance Jun Liu noted that "Our topline growth further moderated quarter-on-quarter amid intensified competition and ongoing external challenges. In our pursuit of high-quality development, we will continue to invest resolutely in building a healthy and sustainable ecosystem, which will be reflected in our results."On the stock market today, U.S.-listed PDD stock is down 8.7% in recent premarket trading. This decline follows the company's second-quarter earnings report in August, where results missed sales estimates and leadership warned of pressure from "intensified competition and external challenges."Composite Rating and EPS
Before the report, PDD stock had an IBD Composite Rating of 77 out of 99, combining five separate proprietary ratings. The best growth stocks typically have a Composite Rating of 90 or better. On the positive side, PDD's earnings have steadily outperformed, with a best possible 99 EPS rating. However, the stock has a meager Relative Strength rating of 18 out of 99, indicating that it has outperformed only 18% of all stocks in IBD's database over the past year based on price performance.Market Response and Competitors
Amazon has responded to Temu's challenge by launching its own ultra-discount business, Amazon Haul, following Temu's model of facilitating direct sales from Chinese merchants to consumers. Meanwhile, the Biden administration restricted the use of a trade exemption that allowed Temu parcels to arrive duty-free in the U.S. It remains uncertain what position Donald Trump will take in his upcoming second term, but he has promised tariffs on imported goods.In China, e-commerce giants Alibaba and JD.com are ramping up discounts and promotions to try to prevent further loss of market share to PDD. The Chinese e-commerce market is facing challenges as consumer spending remains shaky, and investors are debating the effectiveness of government stimulus efforts in reigniting economic growth.Future Outlook
PDD's future remains uncertain as it navigates through intensified competition and external challenges. The company's continued investment in building a sustainable ecosystem will be crucial in determining its long-term success. As the e-commerce landscape continues to evolve, PDD will need to adapt and find ways to differentiate itself from its competitors. Only time will tell how PDD will fare in the coming months and years.