Citi raises Pinduoduo stock to buy, lifts target to $165

On Monday, Citi analyst Alicia Yap upgraded Pinduoduo Inc. (NASDAQ: NASDAQ:PDD) stock rating from Neutral to Buy, while also raising the price target to $165 from the previous $127. The upgrade was influenced by the recent tariff reductions which are expected to benefit China cross-border sellers and have a positive effect on Temu’s sales in the United States. According to InvestingPro data, PDD currently trades at a P/E ratio of 10.6 and appears undervalued based on comprehensive Fair Value analysis. The company, with a market capitalization of $155.7 billion, has demonstrated impressive financial health, scoring 4.4 out of 5 on InvestingPro’s proprietary health metrics.

In her analysis, Yap pointed out that although the US$800 de minimis rule remains unchanged, the shift of Temu’s business model in the US to a semi-managed model and the recent price increases are likely to help manage the impact of the tariffs. She anticipates that sellers will be able to pass a portion of the tariff costs to US consumers, while offsetting another portion through reduced advertising spend and production costs, as they focus on selling higher quality goods with higher average selling prices. This strategy appears to be working well, as InvestingPro data shows the company maintaining an impressive 60.9% gross profit margin and achieving revenue growth of 59% in the last twelve months.

Yap also noted that many sellers had pre-loaded inventory in the US for 3-5 months, which could lead to a temporary cost versus selling price mismatch, resulting in unexpectedly higher profits for Temu in the second quarter of 2025. With the reduction of the tariff concerns, the analyst believes that Pinduoduo is now a more attractive investment, leading to the upgrade and higher price target.

The analyst’s positive outlook on Pinduoduo reflects the potential for improved profitability and growth for the company, especially in the context of the evolving international trade environment. By focusing on higher quality goods and optimizing expenses, Pinduoduo is positioned to navigate the tariff challenges while continuing to expand its presence in the US market through Temu.

The stock market is likely to react to this new assessment from Citi, as investors consider the implications of the tariff reductions and Pinduoduo’s strategic adjustments. The increased price target suggests a higher level of confidence in the company’s ability to perform well despite the ongoing trade policy dynamics. For deeper insights into PDD’s valuation and growth potential, InvestingPro subscribers can access comprehensive Pro Research Reports, which provide detailed analysis of the company’s financial health, growth prospects, and competitive positioning among 1,400+ top US stocks.

In other recent news, PDD Holdings has announced a strategic shift in its business model for its online retail platform, Temu. The company will now focus on goods provided by local American merchants, moving away from inexpensive Chinese imports. This change is expected to help mitigate the impact of tariffs, allowing PDD Holdings to maintain competitive pricing in the US market. In another development, Chinese authorities have requested e-commerce platforms, including PDD Holdings, to stop requiring vendors to offer refunds without product returns. This change aims to reduce financial pressure on merchants, with the new policy set to take effect by July.

Additionally, Pinduoduo, owned by PDD Holdings, plans to invest $13.7 billion over the next three years to upgrade its platform’s merchants. This significant investment underscores the company’s commitment to enhancing its merchant capabilities. PDD Holdings and JD.com have not commented on the new refund policy directive. Meanwhile, Alibaba (NYSE:BABA) Group and China’s State Administration for Market Regulation have yet to respond to requests for comment on the refund policy change.

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