Shares of PDD Holdings, the parent company of online retailer Temu, experienced a significant decline of 28.57% on Monday, marking their largest single-day drop since the company’s Nasdaq listing. The steep fall followed a disappointing second-quarter earnings report that missed Wall Street’s revenue expectations.
According to Shaun Rein, founder and managing director of the China Market Research Group, the magnitude of the drop is “too much of a correction.” Rein, speaking on CNBC’s “Street Signs Asia,” described the market reaction as an overblown panic and suggested that the current drop could present a buying opportunity for investors.
PDD Holdings reported second-quarter revenue of 97.06 billion yuan ($13.6 billion), an 86% increase from the previous year. Despite this impressive growth, the figure fell short of the anticipated revenue of $14.034 billion (99.98 billion yuan), as forecasted by analysts surveyed by FactSet. The company also posted an operating profit of 32.56 billion yuan, up 156% from the same period last year, and a 144% increase in attributable income, reaching 32.01 billion yuan.
Rein noted that despite not meeting expectations, PDD Holdings continues to experience substantial growth. “I actually think Pinduoduo is a good buy at 30% down, because it’s still growing,” he said. He emphasized that the company’s group-buying model, which reduces prices through collective purchases, could benefit from economic downturns as Chinese consumers seek value.
However, the sharp decline in share price may also reflect investor concern over cautious comments from PDD’s leadership, rather than just the earnings numbers. Lei Chen, chairman and co-CEO of PDD, indicated in the earnings release that the company faces numerous challenges ahead. Chen acknowledged the need for short-term sacrifices and potential declines in profitability as PDD invests in trust, safety, and merchant ecosystem improvements.
Additionally, PDD’s Vice President of Finance, Jun Liu, warned that revenue growth will face pressures from increased competition and external challenges. Liu also projected that profitability could be impacted due to ongoing substantial investments.
Ben Harburg, portfolio manager at CoreValues Alpha, suggested that the cautious statements from company leadership might have contributed to the sell-off.
