PDD Holdings (PDD) stock tumbled early Thursday, after the Temu parent company and Chinese e-commerce giant reported third quarter earnings and sales that missed expectations.
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PDD said in a news release 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 polled by FactSet projected the e-commerce company would post adjusted earnings of 19.58 yuan per ADS on sales of 102.87 billion yuan.
Revenue grew 44% in the quarter, compared to sales growth of 86% and 131%, respectively, in the second and first quarters this year.
“Our topline growth further moderated quarter-on-quarter amid intensified competition and ongoing external challenges,” PDD Vice President of Finance Jun Liu said in a news release. “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.
More earnings coverage to come.
PDD Stock Slumping In 2024
PDD stock surged 80% last year, helped by the rapid rise of its international discount shopping site Temu, which emerged as a challenger to Amazon (AMZN) and other global e-commerce players. This year has been a different story. PDD stock was trading 20% lower year-to-date ahead of Thursday morning’s earnings report.
Amazon has responded to Temu’s challenging by launching its own ultra-discount business, called Amazon Haul. The operation following Temu’s model of facilitating direct sales from Chinese merchants to consumers in the U.S. and elsewhere. Meanwhile, the Biden administration in September said it would restrict the use of a trade exemption that has allowed parcels from Temu to arrive on U.S. doorsteps duty-free. It’s not yet cetain what position Donald Trump will take on the issue in his upcoming second term. But he has promised tariffs on imported goods.
In China, e-commerce giants Alibaba (BABA) and JD.com (JD) are ramping up discounts and promotions to try to prevent further loss of market share to PDD’s Pinduoduo. Each of the companies is working in an environment where consumer spending in China remains shaky and investors are debating whether government stimulus efforts can reignite economic growth.
PDD stock sank following its second quarter earnings report in August. The company’s results missed sales estimates, while its leadership warned that growth and profitability will face pressure from “intensified competition and external challenges.”
PDD Composite Rating
Coming into the report, PDD stock had an IBD Composite Rating of 77 out of 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating. The best growth stocks typically have a Composite Rating of 90 or better.
On the positive side, PDD’s earnings have steadily outperformed. The stock has a best possible 99 EPS rating, as tracked by IBD. However, PDD stock has a meager Relative Strength rating of 18 out of 99. The RS Rating means that PDD has outperformed just 18% of all stocks in IBD’s database over the past year based on price performance.
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