Pinduoduo (PDD) is a holding company based in Shanghai that specializes in the creation and operation of an e-commerce platform. The company’s mobile app features a variety of products for its customers, like agricultural goods and everyday items such as clothing, shoes, bags, childcare items, etc.
The company revealed its third-quarter earnings last week. The stock has dropped about 18% since the announcement, closing at $66.50 on November 30.
Why the Downfall?
Revenues increased by 51% year-over-year in the third quarter. The top-line results, on the other hand, fell short of analysts’ expectations, disappointing investors.
Further, Pinduoduo’s monthly active users climbed 15% year-over-year in Q3. However, the rate of increase was slower than the second quarter’s 30% growth.
Markedly, during the quarter, the firm declared that it will shift its focus away from sales and marketing and instead put greater emphasis on “investments in R&D.”
Pinduoduo CEO Chen Lei stated, “We want to leverage our strength in technology to deepen our digital inclusion efforts in agriculture, and will allocate all profits from the third quarter to the ’10 Billion Agriculture Initiative’.”
Expert’s Take
In reaction to the company’s third-quarter earnings, Citigroup analyst Alicia Yap expressed her dissatisfaction with the performance.
Yap sees little growth potential as Pinduoduo struggles to find new clients. Further, Yap believes that the company’s move to waive fees for farmers selling agricultural food goods on its platform will result in a decrease in marketing service revenue.
As a result, the analyst downgraded the rating to Neutral from Buy on Pinduoduo stock and also decreased the price target to $80 from $140.
Website Traffic Details
Interestingly, we used TipRanks’ new Website Traffic tool, which gets its data from Semrush, to verify the company’s website traffic numbers (SEMR).
The statistics from the PDD website traffic reveal a significant divergence. We noted that unique user visits to pinduoduo.com increased by 14.3% in the third quarter. This period, however, was defined by declining stock prices, which fell by 28.6%.
Wall Street’s Take
Turning to Wall Street, the analyst consensus is cautiously optimistic on Pinduoduo, with a Moderate Buy consensus rating, based on 2 Buys and 3 Holds. As for the price target, the average Pinduoduo price target of $106.40 implies 60% upside potential to current levels.
Disclosure: At the time of publication, Shalu Saraf did not have a position in any of the securities mentioned in this article.
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