PDD Earnings Preview: Temu Shifts Business Focus Beyond the U.S. Market

● The company is projected to achieve a revenue of 76.56 billion CNY, representing a year-over-year increase of 103.42%.

● Earnings per share are expected to be 10.41 CNY, up 87.61% from the year-ago quarter.

PDD's team-purchase model, targeting China's large market of value-seeking consumers, can help it take advantage of growth in online buying in lower-tier cities. PDD could rely on word of mouth via team purchases - or "group buying" - to spur sales organically. PDD's online marketing services revenue for the first quarter is expected to reach 37.63 billion CNY, up 38.13% YoY, while transaction services revenue will reach 38.17 billion CNY, a year-over-year increase of 267.27%, according to Bloomberg forecasts.

The bargain app Temu, which has gained spectacular popularity with American consumers, is shifting business priorities beyond the U.S., people close to the company said. One catalyst for the shift is TikTok's troubles with the U.S. government.

Temu is focusing more on acquiring users in Europe and other countries. As a result, it now expects less than a third of its sales to come from the U.S. this year, compared with 60% last year, the people said, a prediction earlier reported by the business publication the Information.

Bernstein analyst Robin Zhu maintained a Buy rating on PDD Holdings, with a price target of $180.00.

BofA raised the firm's price target on PDD Holdings to $191 from $182 and keeps a Buy rating on the shares following what the firm calls "another robust quarter" to end the year. The firm raised its 2024 and 2025 revenue estimates by 6% and 15%, respectively, and non-GAAP net profit views by 16% and 20% on a higher domestic earnings base.

Besides, according to Q1 13F fillings, David Tepper's Appaloosa Management increased stake in PDD Holdings by 1.33 million shares, or +171%, to 2.1m shares. Asia's top private equity firm Hillhouse Capital significantly increased its holdings in PDD by 1.68 million shares in the first quarter, bringing the total to 11.79 million shares. Gao Yi Capital increased its holdings in PDD by 488,200 shares, an increase of 75%, bringing its total holdings to 1,138,000 shares by the end of the first quarter.

Source: Bloomberg, The Fly, Wall Street Journal