Analyst Joyce Ju of Bank of America Securities reiterated a Hold rating on PDD Holdings, reducing the price target to $140.00.
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Joyce Ju’s rating is based on a combination of factors that reflect both positive and cautious elements in PDD Holdings’ performance. The company reported a strong profit beat in the third quarter, surpassing consensus expectations by 25%, which was driven by a rebound in adjusted operating growth and higher-than-expected interest income. This indicates that the decline in profits due to heavy platform investments may have reached its lowest point. However, there are concerns about the company’s future sales momentum and market share, as online marketing services (OMS) growth slowed to 8% year-over-year, marking its first single-digit growth.
Despite the robust expansion of PDD’s Temu platform, the company faces challenges such as a deceleration in OMS growth as it reaches a mature phase, compounded by an industry-wide sluggish growth environment. Management’s guidance also points to intensifying competitive dynamics and the need for continued merchant support to maintain a healthy ecosystem. Additionally, the company’s growth rate and profitability are expected to fluctuate due to ecosystem-supporting initiatives and rapid changes in external environments. These mixed signals contribute to the Hold rating, as the company balances strong performance with potential headwinds.
In another report released yesterday, Bernstein also downgraded the stock to a Hold with a $135.00 price target.