What Investors Need to Know Ahead of PDD Q3 Earnings

● The company is projected to achieve a revenue of 103.70 billion CNY, representing a year-over-year increase of 50.64%.

● Earnings per share are expected to be 19.77 CNY, up 86.47% from the year-ago quarter.

Market experts believe that PDD Holdings’ strength in its e-commerce business model appears to be a major positive, which should drive its long-term growth. Also, the analysts are optimistic about the company’s PDD platform due to its wide range of product offerings, such as agricultural produce, apparel, shoes, food and beverage, electronic appliances, and furniture, among others.

Its innovative approach to e-commerce, mainly its group-buying model integrated with social media platforms, appears to be well-received by consumers. According to Bloomberg consensus forecasts, PDD’s online marketing services revenue for the third quarter is expected to reach 49.12 billion CNY, up 23.78% YoY, while transaction services revenue will reach 53.01 billion CNY, representing a year-over-year increase of 81.84%.

Source: Bloomberg

The accelerated path to profitability for Temu demonstrates PDD Holdings’ effective cost management and scalability in its business model. Also, it exhibits that its strategy of leveraging the experience from the Chinese market to expand internationally continues to yield favorable outcomes.

Furthermore, Temu’s success might offer PDD a valuable hedge against potential slowdowns or higher competition in the domestic Chinese market. Through diversifying the revenue streams geographically, the company can reduce its dependency on a single market.

According to Statista, the number of Temu app downloads reached 431.74 million in 2024 (as of September). Temu sales in the first 6 months of 2024 reached an estimated $20 billion, surpassing annual sales of $15.33 billion in 2023. Temu is forecasted to bring in $54 billion in sales in 2024.

David Alan Tepper, the esteemed founder of Appaloosa Management, has once again made notable adjustments to his investment portfolio in the third quarter of 2024. Tepper's latest 13F filing reveals he aggressively increased his stakes in several companies, PDD Holdings saw the most substantial increase, with an additional 3,361,132 shares, bringing the total to 5,301,132 shares.

Meanwhile, Freemont Capital Pte Ltd increased its stake in shares of PDD Holdings by 23.8% in the third quarter, according to the 13F filing. Vanguard Group Inc. increased its position in PDD by 0.4% in the 1st quarter. Vanguard Group Inc. now owns 24,261,575 shares of the company's stock valued at $2,820,408,000 after acquiring an additional 97,648 shares during the period.

The options market overestimated PDD stocks earnings move 23% of the time in the last 13 quarters. The predicted move after earnings announcement was ±11.7% on average vs an average of the actual earnings moves of 14.4% (in absolute terms). This shows that PDD tended to be more volatile than the options market predicted for the earnings stock price reaction.

From the perspective of implied volatility skew, market sentiment is slightly bullish on PDD.The current 25-Delta Put-Call Spread (-0.8) is slightly below its 20-day moving average (-0.5), this indicaes that the market pricing for option premium of upside calls are higher than downside put.

Source: Yahoo Finance, Market Chameleon