PDD stock jumped on Thursday, the day after Temu-parent company PDD Holdings reported first quarter earnings that easily exceeded expectations from analysts. Sales jumped 131% year-over-year for the March-ending quarter.
On the stock market today, U.S.-listed PDD added 4.5% to close at 153.63. That's after gaining 1.1% in Wednesday trading, immediately following its earnings report.
PDD Holdings said early Wednesday that it earned an adjusted 20.72 Chinese yuan ($2.83) per share from sales of 86.8 billion yuan ($12 billion) for the March-ended quarter. On average, analysts projected the Chinese e-commerce company would post adjusted earnings of 10.49 yuan per share on sales of 75.9 billion yuan, according to FactSet.
For the same period a year earlier, PDD Holdings posted adjusted earnings of 6.92 yuan per share on sales of 37.6 billion yuan.
PDD Stock: Temu and Pinduoduo Parent Company
PDD Holdings includes the China-focused e-commerce platform Pinduoduo and international discount retail platform Temu. Shares of PDD surged nearly 80% in 2023, as Temu expanded rapidly in the U.S. and elsewhere. Powered by social media advertising and a Super Bowl commercial, Temu was the top downloaded app in the U.S. last year by a wide margin.
Meanwhile, both Alibaba and JD.com posted better-than-expected sales for their March quarters last week. The tech giants are PDD's main competitors in China.
Analysts were mostly positive on PDD's Q1 results. Morningstar analyst Chelsey Tam upped the research firm's fair value estimate for PDD stock by 8% to 230.
"We think Temu's profitability will improve faster than previously estimated due to its introduction of the half consignment model, under which logistics costs will be borne by merchants," Tam wrote Thursday. "We also believe PDD's domestic platform will be able to defend its position given the strong consumer perception of its value-for-money positioning."
Temu Regulation Watch
Coming into its earnings report, PDD shares were trading roughly flat for 2024. PDD stock fell in the first months of the year amid concerns about consumer spending in China and regulatory concerns in the U.S.
While Temu spent billions on marketing to U.S. customers last year, the firm is reportedly focused more on other countries this year.
The recent U.S. crackdown on TikTok and broader scrutiny of Chinese-founded technology firms contributed to the shift, as the Wall Street Journal reported last week. U.S. lawmakers have also questioned Temu's compliance with laws barring companies from importing products made using forced labor.
PDD does not break out separate results for its Temu business. The firm did not reference Temu by name on its call with stock analysts Wednesday morning. PDD co-founder and Chairman Lei Chen told analysts that its "global business is still in a exploration stage, and there's plenty of room for improvement," according to a FactSet transcript.
The company also will invest in building what Chen called an "industry-leading compliance program."
PDD Stock: Technical Ratings
PDD stock had recently broken out past a cup-with-handle base buy point of 142.32, according to MarketSurge. Shares closed Tuesday in buy range.
Coming into the report, PDD stock had a best-possible IBD Composite Rating of 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating. The best growth stocks have a Composite Rating of 90 or better.
Further, PDD's IBD Relative Strength Rating was 95 out of 99.
