PDD Holdings (NASDAQ: PDD) stock price was one of the best performers in Wall Street after the company published strong financial results. It surged from Tuesday’s close of $130 to almost $150, its highest level since January.
Pinduoduo and Temu are growingPDD Holdings, the secretive Chinese e-commerce giant, published strong financial results, implying that its business was doing well.
The company’s revenue during the quarter surged by 123% YoY to $12.5 billion. This made it one of the fastest-growing e-commerce companies in the world.
It also grew its profits substantially. Its operating profit soared by 146% to $3.15 billion while the net income rose to $3.2 billion. In a statement, Lei Chen, the CEO said:
“In 2024, we remain dedicated to further improving consumer experiences, enhancing technology innovations, and generating positive impacts in our communities.”
PDD Holdings is not a company many people in the US know about. Yet it is the parent company of one of the most popular applications in the e-commerce industry: Temu. It also runs Pinduoduo, a major e-commerce platform in China.
PDD remained secretive about its Temu business. However, a closer look at its financials show that the company increased its marketing spend during the quarter. Its sales and marketing costs jumped by 50% to $3.5 billion. This explains why Temu’s advertisements are all over the place.
PDD Holdings has embraced a relatively novel strategy. It is aiming to grow its market share in China through Pinduoduo and then capture the international market with the Temu brand.
However, this strategy is risky as we have seen with other similar companies like Wish.com. After seeing explosive growth a few years ago, Wish.com struggled to gain market share and its losses mounted. It was then sold at a big discount this year.
The other risk is that there are geopolitical risks as we have seen recently with attempts to ban TikTok. US politicians are alleging that the company uses Xinjian labour to manufacture its products. As a result, Temu is said to be considering its focus on Americans.
Broadly, there are risks about the many unknowns about PDD Holdings and how it operates. Unlike other mainstream companies, it has remained quite secretive about its operations around the world. Also, it has not disclosed any material information about Temu such as the number of active users, revenues, and losses.
PDD Holdings stock forecast
PDD stock has been one of the best performers in Wall Street as it jumped by 150% from its lowest level in 2023. This rally happened as most Wall Street analysts placed a buy rating on the company despite its opaque nature.
PDD Holdings is now attempting to move to its highest point this year of $153. It has remained above all moving averages. I suspect that it will maintain its bullish trend in the coming weeks after the strong financial results. This rally could see it jump to $160 soon.
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