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On Tuesday, Barclays (LON:BARC) reiterated an Overweight rating on Pinduoduo Inc. (NASDAQ:PDD) with a steady price target of $158.00. The decision follows an analysis of the company’s first-quarter earnings, which revealed a revenue shortfall primarily due to lower transaction revenues. According to Barclays, these figures largely pertain to Pinduoduo’s Temu platform earnings. The company, currently trading at $101.45, shows strong fundamentals with a P/E ratio of 10.61 and impressive revenue growth of 59% year-over-year. InvestingPro analysis suggests the stock is currently undervalued relative to its Fair Value.
The shortfall in Pinduoduo’s transaction revenue for the first quarter of 2025 was attributed to Temu’s performance, which did not meet expectations. Barclays used third-party gross merchandise volume (GMV) estimates for Temu to determine that its revenues were below the consensus forecasts, contributing to the majority of the miss in Pinduoduo’s transaction revenue. Despite the revenue miss, InvestingPro data shows the company maintains robust financial health with a 60.92% gross profit margin and holds more cash than debt on its balance sheet.
Despite the Temu revenue being lower than anticipated, Barclays noted that Pinduoduo’s sales and marketing expenses for Temu in the first quarter were higher than previously projected. This suggests that the company may have ramped up its sales and marketing efforts in regions outside the United States, as it appears to be withdrawing from the U.S. market for its cross-border full consignment model.
Barclays has developed a proprietary model for Temu, which they offer to provide upon request. This model has been a part of their valuation work, where they currently assign no value to Temu. Consequently, despite the revenue miss and increased marketing spend, Barclays has chosen to keep its rating and price target for Pinduoduo unchanged.
In other recent news, Morgan Stanley (NYSE:MS) has maintained its Overweight rating on Pinduoduo Inc., with a price target of $150, anticipating that the company’s upcoming financial results could significantly impact its stock. The firm projects an 11% year-over-year growth in Pinduoduo’s online marketing services revenue, alongside an 18% increase in gross merchandise volume. Despite this growth, a decrease in non-GAAP net profit by 8% year-over-year is expected, attributed to increased subsidies and a high earnings base from the previous year. Citi has upgraded Pinduoduo to a Buy rating, raising the price target from $127 to $165, citing benefits from recent tariff reductions and strategic shifts in Temu’s business model in the US. This move is expected to enhance profitability by allowing sellers to manage tariff impacts through higher average selling prices and reduced advertising costs. PDD Holdings, the parent company of Pinduoduo, is shifting its US operations under Temu to a local fulfillment model, focusing on goods from American merchants to mitigate tariff impacts. Additionally, Chinese authorities have instructed e-commerce platforms, including PDD Holdings, to discontinue no-return refunds to reduce financial pressure on merchants. These developments highlight Pinduoduo’s strategic adjustments in response to evolving market conditions and regulatory changes.
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