Temu Parent PDD’s Stock Dips Pre-Market After Wide Earnings Miss: Retail Disheartened

U.S.-listed shares of Temu parent PDD Holdings Inc. ($PDD) tumbled 11.6% in premarket trading Thursday after reporting third-quarter results that fell well short of expectations.

Net income rose to RMB24.98 billion ($3.56 billion), or RMB16.91 per ADS, up from RMB15.54 billion a year ago. 

However, adjusted earnings per ADS of RMB18.59 missed the RMB19.58 consensus by a wide margin. 

Revenue increased 44.3% year-over-year to RMB99.35 billion ($14.16 billion), but came below the RMB102.87 billion estimate.

Cost of revenue surged 48%, outpacing revenue growth, and dragged gross margins down to 60% from 61%. 

“In Q3, we stepped up investments in our platform ecosystem through merchant support policies and trust and safety updates,” said Co-CEO Jiazhen Zhao. 

Despite briefly surpassing Alibaba ($BABA) in market capitalization earlier this year, PDD now faces mounting competitive pressures. 

Alibaba recently launched a discount app, and rival JD.com ($JD) announced initiatives to offer more competitively priced products. 

These moves have intensified the challenges for PDD, whose stock has dropped over 20% year to date, compared to a 18% gain for the iShares MSCI China ETF ($MCHI) and a nearly 25% rise in the S&P 500.

PDD stock and sentiment score on Nov 21 as of 7:30 am ET | source: Stocktwits

Retail sentiment on Stocktwits turned more ‘bearish’, with message volume surging to ‘extremely high’ levels before the bell on Thursday.

Some users predict a decline exceeding 12% from the last close.

“In our pursuit of high-quality development, we will continue to invest resolutely in building a healthy and sustainable ecosystem, which will be reflected in our results,” said Jun Liu, VP of Finance. 

However, near-term challenges and moderating growth appear to have rattled investor confidence.