Strategic Shifts and Long-Term Growth Potential for PDD Holdings Amid Short-Term Challenges

PDD Holdings (PDD – Research Report), the Consumer Cyclical sector company, was revisited by a Wall Street analyst today. Analyst Alicia Yap from Citi maintained a Buy rating on the stock and has a $152.00 price target.

Alicia Yap’s rating is based on a combination of factors that suggest potential for future growth despite current challenges. The shift from a fully-managed to a semi-managed model for Temu has led to a slowdown in transaction services revenue growth, but it is seen as a strategic move that could yield benefits in the long term. The mismatch between investment and return cycles, where merchant support initiatives are treated as accounting expenses, indicates that while short-term profitability may be impacted, there is potential for revenue growth in future quarters.
Alicia Yap also highlights PDD Holdings’ commitment to supporting local merchants and expanding into new product categories, which could enhance its market position. The company’s substantial financial commitment to a Rmb100bn subsidies program and increased marketing support for high-quality merchants are expected to strengthen its ecosystem. While short-term profitability challenges are anticipated, these strategic initiatives are viewed as investments in building a sustainable long-term ecosystem, making the current dip in share price an opportunity to buy.

In another report released today, Jefferies also maintained a Buy rating on the stock with a $121.00 price target.