Does Temu Have a Stock?

Tighter budgets have fueled a massive demand for budget products like those on the Chinese e-commerce platform Temu.

As the platform has surged in popularity, investors have naturally looked for ways to buy in to the popular discount retailer.

Some have wondered if there is a way to ride on the coattails of the Chinese ecommerce giant. In other words, doe Temu have a stock? While Temu stock is not publicly traded, investors can buy shares in its parent company, PDD Holdings with ticker symbol PDD.

Temu is owned by Chinese e-commerce giant Pinduoduo, which has been listed on the U.S. stock market as PDD Holdings (NASDAQ: PDD) since its initial public offering in 2018. Due to Temu’s popularity, PDD has been one of the top growth stocks over the past few years. Pinduodou shares have jumped over 285% since the IPO.

However, PDD is still currently trading at less than half of its highs in 2021. A recent sales slump coupled with concerns about tightening U.S. trade regulations has driven a substantial recent selloff. However, the company still grew its revenue and beat earnings estimates last quarter.

So is Pinduoduo stock a buy?

Why Did Pinduoduo Stock Drop?

After the company reported its results for the second quarter of 2024, PDD plummeted by over 30%. Pinduoduo reported Q2 revenue of $13.6 billion, which was an 86% year-over-year improvement. However, that result fell over 3% short of the $14 billion analysts predicted.

The company had net income of $4.4 billion, which was 144% higher than the same quarter of last year, and Pinduoduo beat earnings per share estimates by over 16%. The company also grew its operating profit by 156% year-over-year to $4.48 billion.

While Pinduoduo had a solid quarter, the revenue miss discouraged many investors but the selloff is to some extent  attributed to comments of Pinduoduo’s leadership who stated that sales challenges are here to stay.

“While encouraged by the solid progress we made in the past few quarters, we see many challenges ahead,” said Lei Chen, Chairman and Co-Chief Executive Officer of PDD Holdings, in the earnings release. “We will invest heavily in the platform’s trust and safety, support high-quality merchants, and relentlessly improve the merchant ecosystem. We are prepared to accept short-term sacrifices and potential decline in profitability.”

Will Pinduoduo Stock Keep Falling?

The company’s leadership attributed the revenue stagnation to strong competition and external challenges, and both of those aspects are likely to hinder Pinduoduo’s sales for the foreseeable future.

Embattled Chinese customers are engaging in extreme cost cutting that is driving them to brands like Costco, Walmart, and Sam’s Club.

The weakness in the country’s economy is one of the reasons Pinduoduo expanded its platform through Temu, but there is plenty of competition to contend with, not least from Amazon. Pinduoduo also faces heavy competition from domestic rivals like Alibaba, JD.com, and Shein.

While Temu has grown exponentially over the past few years, customers have reported many issues that have affected the company’s reputation. Chief among the complaints are the often low-quality, knock-off products on the platform and the often delayed delivery of shipments.

The massive ramp-up in the number of shipments Temu is sending to the U.S. has also garnered regulatory attention. The U.S. has a trade loophole that allows shipments under $800 to be sent without scrutiny from U.S. Customs. Because most Temu orders are far beneath that threshold, the company’s shipments largely fall outside of trade regulations.

The U.S. government’s guidelines were established when there were only around 140 million packages that were received from overseas. The massive explosion in shipments from China, which has largely been driven by e-commerce platforms like Temu and its competitors, means there are now over a billion foreign shipments.

The shipments deluge has not only made it harder for U.S. officials to identify illegal shipments, but it has also allowed Temu to escape paying tariffs on those packages. The new rule proposal would close that loophole and increase Temu’s costs to ship to the U.S.

How Do Analysts Rate Pinduoduo Stock?

Despite the challenges facing the company, Wall Street analysts are overwhelming bullish on PDD.

Out of 47 analysts who have rated the stock, 44 believe Pinduoduo stock is a buy at this price point. The average price target is $163.25, which would be a 71.9% increase from where the stock currently trades.

The high price target for the stock is $250.98, which is a 164% increase over the next 12 months. Currently not a single Sell rating exists on PDD Holdings stock, but the lowest forecast is $119.91, which still represents a 26.2% increase over the next 12 months.

Is Pinduoduo Stock Undervalued?

Though Wall Street still has faith in the company, the stock’s price-to-earnings ratio is 10.3x, even after the recent selloff. By comparison, e-commerce competitor JD.com has a P/E of 9.4.

Chinese e-commerce giant Alibaba now has a P/S value of 21.76x. However, Alibaba also has a 2.38% annual dividend yield, which equates to a $0.50 per share quarterly payout.

Neither JD.com nor Pinduoduo currently pay a dividend.

Is Pinduoduo Stock a Buy, Sell, or Hold?

Temu ignited tremendous enthusiasm when it burst on the scene a few years ago, and investors are understandably looking for ways to invest the company. There isn’t a stand-alone Temu stock, but investors can buy a share of Temu’s parent company, Pinduoduo.

While PDD has been a growth stock over the past few years, the company has struggled to maintain its meteoric growth. As sales have slumped, the stock has responded in kind.

Though the recent selloff might be an extreme reaction, PDD might continue to struggle ahead. The comments from Pinduoduo leadership should be concerning given the headwinds the company is facing.

“In the past quarter, our revenue growth rate slowed quarter-on-quarter. Looking ahead, revenue growth will inevitably face pressure due to intensified competition and external challenges,” said Jun Liu, VP of Finance of PDD Holdings in the earnings release. “Profitability will also likely to be impacted as we continue to invest resolutely.”

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.