PDD Earnings Preview: Temu Shifts Business Focus Beyond the U.S. Market
Chinese e-commerce giant $PDD Holdings(PDD.US$ is set to release its first quarter 2024 financial result on May 22. PDD’s stock has gained 25% over the past months.
● 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.
E-Commerce Push for Growth
E-commerce firms, including $Alibaba(BABA.US$ and $PDD Holdings(PDD.US$, are on track to fuel more than half of China's retail sales growth this year, according to Bloomberg analysis, after online channels led 67% of gains in January-March physical-goods receipts. Intense price rivalry among Alibaba, PDD, $JD.com(JD.US$ and Douyin will likely spur cheaper online offerings and stimulate spending.
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.
PDD's Temu to Focus on Expansion Outside US
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.
It is a notable strategy shift for a company that in less than two years became the U.S.'s second-most popular shopping app after $Amazon(AMZN.US$ by monthly users. Temu said that its expansion to new markets doesn't reflect a reduced emphasis on the U.S. The retailer said it is looking to build a global e-commerce platform and that its decisions aren't driven by the experience of another company.
What do analysts think about PDD?
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
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