Temu-owner PDD’s New York-listed shares (PDD) fell Thursday after the Chinese e-commerce giant reported slower-than-expected sales growth amid increasing domestic competition and U.S. tariffs that throttled its expansion.
PDD revenues in the Fiscal fourth quarter grew at 24%, below expectations and in sharp contrast to the better-than-expected results from e-commerce rivals Alibaba (BABA) and JD.com (JD) in the December quarter, as Beijing ramped up efforts to boost consumer spending. China’s government has prioritized policies to boost domestic consumption this year as it seeks to counter cautious spending habits and U.S. tariffs.
PDD Revenue Growth Slows
PDD reported revenue of 110.6 billion yuan ($15.3 billion) for the quarter, against expectations for 115.38 billion yuan in sales. Revenue growth has been trending lower consistently with the 24% increase in the fourth quarter coming after 44% growth in Q3, 86% in Q2 and 131% in Q1 Fiscal 2024. It was the slowest pace of growth since the first quarter of 2022.
Meanwhile net income was up 18% to 27.4 billion yuan, slightly ahead of expectations, but this too was down from 61% growth in Q3 and 146% growth reported a year ago. The stock declined 8% in premarket trading on Thursday after the update.
Competition and Tariffs Weigh
Domestic competition has been intense, with PDD warning since August that profitability in its Chinese Pinduoduo business will decline. It’s also facing pressures in its international Temu business from U.S. tariffs on Chinese goods and threat to close a tax loophole for small value parcels. In addition to tariffs of 20% on Chinese goods, Trump could close a 100-year-old loophole that allows online retailers to send small packages to the U.S. without paying tax, which has been a key competitive advantage for the likes of Temu and Shein as they attempt to win market share from Amazon (AMZN).
Currently, the “de minimis” rule exempts shipments under $800 – but Trump wants this to no longer apply to goods coming from China, which would add a huge additional levy on Chinese firms that would not apply to domestic retailers.
Is PDD a Good Stock to Buy?
Currently there is just one PDD analyst price target from the last three months, but this could change in light of the earnings update.
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