Temu app owner PDD Holdings is Thursday's pick for IBD 50 Growth Stocks To Watch, as the e-commerce giant forms a flat base. The China stock held up after an earnings breakout, and its chart shows constructive signs.
PDD Holdings operates Pinduoduo, a Chinese e-commerce platform, and its Temu website and app. Pinduoduo is a Chinese app that lets consumers buy directly from manufacturers.
The company's global Temu platform sells third-party low-priced merchandise. Temu's U.S. user growth is nothing short of spectacular, going from 5.8 million users in October 2022 to 104.2 million in April 2023, according to MobiLoud.com. And by July 2023, the app had over 130 million downloads.
The Temu platform expanded into Australia and New Zealand in March, and a handful of European countries in April.
The stock ranks No. 1 out of 60 stocks in IBD's internet retail group. The group sank to No. 137 out of the 197 IBD industry groups, from 67 four weeks ago.
China Stock Forming A New Base
The e-commerce stock is forming a new flat base as it pauses from a breakout on Aug. 29. Shares have been trading tightly, in action that often precedes a breakout. The next buy point is 103.60. Just remember that the stock market is in a correction. If you buy, watch for signs of weakness and follow the 7% sell rule.
Volume has been light in PDD as the new base forms. The China stock is trading above its 21-day exponential moving average.
Shares gapped up over 15% in heavy volume on Aug. 29 and broke out of a deep cup-with-handle base with a 92.79 buy point. The move followed PDD's higher than-expected second-quarter earnings and sales. Shares are now above a 5% buy zone that goes to 97.43, according to MarketSmith.
PDD shares have gained 19% this year, lagging Amazon.com's 49% rise and MercadoLibre's 42%. But PDD's stock price and relative strength line are holding up better than its peers.
PDD's 2.0 up/down volume ratio indicates strong demand. In addition, it holds a B+ IBD Accumulation/Distribution Rating.
Temu App Owner Sales Continue To Grow
The e-commerce company's second-quarter earnings growth slowed to 28%. That followed EPS gains of 258%, 31% and 117% in the prior three quarters. In addition, operating profit grew 46% over last year's quarter.
Sales grew 66% following gains of 50%, 35% and 46%. "In Q2, we seized the opportunities of favorable consumption trends and invested firmly and responsibly," said Jun Liu, vice president of finance, in the earnings release.
Analysts expect full-year 2023 earnings per share to grow a modest 2% then pop 24% next year, according to MarketSmith.
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