Temu’s Parent PDD Stock Faces Sharp Selloff as Forecast Disappoints

PDD Holdings (PDD) nosedived around 14% on Tuesday after delivering a weaker-than-expected Q1 and a shaky forward outlook. Once the darling of fast-growth e-commerce, the Temu parent is now confronting hard limits on profitability and investor patience. Wall Street responded swiftly, slashing price targets and rethinking the overseas expansion narrative.

Citi Cuts Target, Sticks With Buy

Alicia Yap at Citi kept her Buy rating and stuck with a $152 price target. She acknowledged short-term pressure but backed PDD’s move from a fully managed to a semi-managed model as a smart shift. Yes, it’s slowed revenue from transaction services—but Yap sees it as a long-term play to make the platform more flexible and merchant-friendly.

She pointed to the timing gap between what PDD is spending now and when the payback will show. Big merchant support programs hit the bottom line fast, but the return comes later. That mismatch is weighing on profits today—but in her view, it’s laying the groundwork for future growth.

Yap also called out the ¥100B subsidies and stronger support for high-quality merchants as part of a clear plan: grow the ecosystem, widen the moat. She sees the dip in share price not as a red flag, but as a chance to buy ahead of what she believes is a more stable, more scalable business down the road.

This is a tempered conviction. She’s clearly bracing for volatility, signaling that the bull case depends on execution, not just growth. Her tone suggests confidence in PDD’s scale but caution about its margin math going forward.

Morgan Stanley Trims Target, Maintains Overweight

Morgan Stanley’s Eddie Wang pulled the price target down to $130 from $150 but kept an Overweight rating. The team acknowledged the bumpy quarter but highlighted PDD’s domestic e-commerce dominance as a stabilizing force. They see long-term upside—but warned that the Temu buildout could cap profits for the rest of 2025.

This is a measured take: Morgan Stanley isn’t dismissing the selloff, but it’s viewing the pullback as a potential re-entry point. The analysts are leaning on PDD’s infrastructure and user base in China while keeping a wary eye on the Temu cost curve.

PDD Misses Across the Board

The company posted revenue of ¥95.67B ($13.18B), falling short of the ¥103.1B consensus. Net income slid 47% year-on-year to ¥14.74B, and diluted EPS came in at ¥9.94 ($1.37), well below the ¥18.89 expected. Operating profit plunged 38% as marketing costs ballooned by 43% to ¥33.4B.

This was a comprehensive miss—not a soft landing, but a skid across every major metric. For a company priced for acceleration, this kind of slowdown sends a message: growth alone isn’t enough when margins are crumbling.

PDD’s Management Defends Spending Blitz

Co-CEO Lei Chen justified the spending, calling the margin sacrifice “necessary” to support merchants and consumers. He cited a ¥100B merchant fund and ¥10B in coupon subsidies. VP of Finance Jun Liu echoed the message, saying the slower growth was anticipated and linked to external disruptions in Q1.

Translation: management is asking for patience, insisting that the short-term hit will pay long-term dividends. But that hinges on two things—trust in execution, and an external environment that doesn’t get worse. It’s a strategic bet, but one that now comes at a real cost to earnings quality.

Wall Street Cools on the Temu Story

PDD stock ended the day at $102.98, down nearly 18% from recent highs. With core metrics deteriorating and guidance clouded, analysts are no longer buying Temu as the global rocket ship it once seemed. Until profitability improves and spending rationalizes, the Street is stepping to the sidelines.

This isn’t about one bad quarter—it’s about a business model that’s hitting turbulence in its most ambitious phase. PDD still has growth, but the premium now comes with a warning label.

Is PDD Stock a Good Buy?

Despite the turbulence, PDD still carries a Moderate Buy rating across Wall Street. Out of 16 analysts covering the stock in the past three months, 10 rate it a Buy, five call it a Hold, and just one is in the Sell camp.

The average 12-month PDD price target stands at $135.41, implying 31.49% upside from the current price of $102.98. The Street isn’t abandoning PDD—but it’s clearly watching the next few quarters very closely.

See more PDD analyst ratings