No. of Recommendations: 3
American depository shares of PDD Holdings (NASDAQ:PDD) are unraveling in Tuesday’s premarket trading after first quarter results from the parent company of Temu and Pinduoduo underscored challenges faced by its Chinese marketplace and the impact on the business from U.S. trade policy, including the elimination of the de minimis exemption.
“As communicated previously, a slowdown in growth rate is expected as our business scales and challenges emerge. This trend has been further accelerated by the changes in the external environment in the first quarter,” said Jun Liu, VP of Finance. “Our financial results may continue to reflect the impact of sustained investments in the ecosystem as we support merchants and consumers through uncertain times.”
While sales were up 10% from the same quarter last year, the increase was largely attributed to revenue from online marketing services, which was up 15% from a year earlier. Transaction revenue increased by a more modest 6% to $6.5B, less than $7.53B estimates.
Increased spending on the e-commerce platform cut the company’s adjusted profit by 45% to $1.56 and more than a dollar below expectations. Net cash generated from operating activities was also down from last year, declining 26% to $2.14B.
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