Thursday, June 20, 2024

PDD upgraded to Buy following epic revenue growth: Goldman Sachs

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Pinduoduo, Taobao, Tmall, Temu, Vipshop and JD.com app icon on screen

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PDD Holdings (NASDAQ:PDD) was upgraded to Buy from Neutral by Goldman Sachs following its first quarter results that showed the e-commerce giant’s total revenue explode 131% year over year.

The bank also upped its price target on the stock to $184 from $145.

“We lift our near-term online marketing revenue growth and 2024-26E group profit estimates by 25-43% on the back of PDD’s sustained advertising revenue growth momentum in 10 and faster turnaround of Temu unit economics on its business model shift,” said Goldman Sachs analysts Ronald Keung and David Ma, in a note Friday.

PDD, which owns Temu, was up another 2% during pre-market trading Friday after closing 4.4% higher on Thursday.

“We are focused on building long-lasting trust with our consumers and not on short-term gains,” said PDD CEO Lei Chen. “As a company that is still in the growth mode, we will continue to focus on long-term value creation and invest firmly into opportunities with great potential. We are not guided by short-term goals, and this is also reflected in how we manage our global business.”

Despite PDD’s incredible growth in the past quarter, Keung said they continue to see “limited investor appetite in valuing PDD’s Temu at full business potential.”

PDD stock has only increased 5% year to date.

Still, analysts are stoutly bullish on the stock. Seeking Alpha analysts rate it a Buy, while Wall Street analysts and Seeking Alpha’s Quant system, which routinely beats the market, both rate it a Strong Buy.

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