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Investing.com - Bernstein SocGen Group downgraded Pinduoduo Inc. (NASDAQ:PDD) stock rating from Outperform to Market Perform on Wednesday, while lowering its price target to $135.00 from $140.00. The e-commerce giant, currently valued at approximately $170 billion, has seen its shares decline 12% over the past week, though they remain up 23% year-to-date.
The downgrade reflects Bernstein SocGen’s assessment that Pinduoduo’s domestic business is maturing, with analyst Robin Zhu noting recent non-growth in daily active users and time spent as "problematic for a business model reliant on top funnel dominance." The firm suggested the company should begin "doing grown-up company things" such as meeting with investors and returning cash. According to InvestingPro data, Pinduoduo holds more cash than debt on its balance sheet, positioning it well for potential shareholder returns.
Pinduoduo reported third-quarter revenue of RMB108 billion, which was 5.7% above Bernstein SocGen’s estimate of RMB102 billion and in line with consensus. Operating profit reached RMB27.1 billion, exceeding both the firm’s estimate and consensus by 18.7% and 10.7% respectively. The company maintains strong profitability with a gross margin of 57.5% and has delivered nearly 20% revenue growth over the past year.
The company’s Online Marketing Services grew only 8.1% year-on-year, which the firm believes undershot gross merchandise value growth, suggesting advertisers are shifting spending to competitors like Alibaba and JD. Transaction Services revenue increased 9.9% year-on-year, benefiting from lower user incentives for Duoduo Grocery and higher mark-ups on merchant purchasing for Temu. Despite these challenges, InvestingPro analysis indicates Pinduoduo is currently undervalued, with analysts maintaining a "Strong Buy" consensus and an average price target suggesting 23% upside potential.
Bernstein SocGen identified Pinduoduo’s potential mobilization of its "substantial cash reserves to reboot domestic growth" as a significant risk to both its own earnings and the broader Chinese e-commerce sector. The firm noted that Temu appears to be the company’s current priority, with recent feedback indicating resumed marketing spend in the United States. With a P/E ratio of 13.9 and strong financial health metrics, Pinduoduo maintains significant financial flexibility to pursue these growth initiatives.
In other recent news, PDD Holdings Inc. announced its Q3 2025 earnings, which did not meet market expectations. The company’s earnings per share (EPS) were reported at 21.08, falling short of the projected 23.5. Additionally, PDD Holdings’ revenue reached 108.3 billion RMB, which was below the anticipated 145.2 billion RMB. These financial results have raised investor concerns regarding the company’s current performance. While the earnings report was the focal point, there were no updates on mergers or acquisitions for PDD Holdings. Analyst reactions to these earnings have yet to be detailed, with no specific upgrades or downgrades reported. Investors continue to monitor PDD Holdings for further developments and any potential strategic shifts.
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