PDD Holdings, the parent group for Pinduoduo and Temu released its financial report for Q2 2024, which ended on 30 June. PDD’s Q2 revenue was 97.06 billion RMB (13.62 billion USD), up 85.65% year-on-year (YoY) with net profit up 144%, which is far ahead compared to JD.com and Alibaba.
However, its Nasdaq share prices dropped over 28% on Monday upon hearing this news, which meant the company lost 50 billion USD of its value. As PDD was seen as “the hope for China concept stock” in the US, its share price drop was also accompanied by Bilibili and Alibaba dropping over 4%, JD.com over 3% as well as others. PDD’s share price did, however, recover 3% before the market opened on Tuesday.
This is, partly because the quarterly income is lower than the market had expected at 99.99 billion RMB (14.03 billion USD). Also, it is the first quarter that the group has seen a slowdown in revenue growth, down from 94%, 123% and 131% in Q3 2023, Q4 2023 and Q1 2024. The growth of profit also slowed down from Q1’s 246% YoY.
Another reason is the company and its management warned investors of strong competition in China and the group would be investing more. There will be no buyback or dividends for investors for the next few years. PDD will also spend over 10 billion RMB (1.40 billion USD) to support merchants.
Some pundits believe these statements acted as profit warnings for some investors and is the main cause of the drop. Others believe it is part of the platform’s effort to shed the “low price” image and try to enter a “high quality” market with better merchants as it sacrifices short-term profits for long-term development. As its revenue and profit didn’t miss expectations by too much, it might need further monitoring to find out why the share price dropped so steeply and what PDD plans to do.
