Bank of America Cuts PDD Holdings' Target to $120, Maintains Hold Rating

Bank of America Securities analyst Joyce Ju has cut PDD Holdings' target to $120 from $140 and maintained a "Hold" rating due to weaker quarterly results, including a slowdown in transaction revenue growth and a decline in adjusted net profits. Ju attributed the disappointing performance to substantial investments in the platform ecosystem and expects earnings to remain pressured in the next few years.

Bank of America Securities analyst Joyce Ju has revised her target price for PDD Holdings, reducing it from $140 to $120 and maintaining a "Hold" rating. This adjustment comes in response to the company's latest quarterly results, which revealed a slowdown in transaction revenue growth and a decline in adjusted net profits. Ju attributes the disappointing performance to substantial investments in the platform ecosystem and expects earnings to remain under pressure in the coming years [3].

PDD Holdings, the parent company of Pinduoduo and global app Temu, reported mixed financial results for Q1 2025. Revenue grew by 10% year-over-year to RMB95.67 billion (~$13.18 billion), which missed estimates of roughly $14.2 billion and marked a significant deceleration from the prior year's 131% growth. Net income declined by 47% to RMB14.74 billion ($2.03 billion), with GAAP EPS of $1.36 per ADS, a notable drop from expectations of approximately $2.49. Profitability was negatively impacted by substantial strategic spending, resulting in operating profit decreasing by 38% to RMB16.09 billion and margins compressing from nearly 30% to about 17% [4].

The company's strategic efforts included an expanded RMB100-billion merchant support program and RMB10 billion in consumer incentives to drive more consumption during difficult macroeconomic pressures. Co-CEO Lei Chen justified these investments as necessary to build ecosystem resiliency, despite the short-term pressures on margins. While core revenues remained stable, marketing services increased by 15% year-over-year and transaction services increased by 6%, the more modest growth was largely due to heightened competition and weaker consumer spending attributed to the prolonged downturn in China's property market [4].

PDD Holdings continues to have a strong balance sheet, with RMB364.5 billion (~$50.2 billion) in cash and short-term investments, which accounts for over 30% of its market cap. This substantial cash position allows the company to continue with its strategic investments without the need for external financing [4].

Analysts from UBS have noted that PDD's management tone is cautious, highlighting macroeconomic uncertainties and significant investments in the ecosystem. They expect continued pressure on profitability due to external policy environments such as tariffs and intensified domestic competition [3].

The company is facing additional challenges from the U.S. trade policies, particularly the removal of the "de minimis" tariff exemption, which has increased the tariff rates on low-value goods imported from China. This has led to a notable decline in Temu's US sales [2].

In conclusion, PDD Holdings faces significant challenges in the near term due to slowing growth, increased competition, and the impact of US tariffs. However, the company's strong balance sheet and strategic investments in the ecosystem position it for long-term growth, despite the current headwinds. Investors will be closely watching PDD's ability to navigate these challenges and demonstrate user growth and increased volume in 2026.

References:
[1] https://www.tradingview.com/news/reuters.com,2025:newsml_L3N3S10LV:0-ats-bank-of-montreal-national-bank-of-canada/
[2] https://nypost.com/2025/05/27/business/temu-owners-shares-drop-as-profits-cut-in-half-by-trump-tariffs/
[3] https://www.scmp.com/tech/big-tech/article/3312161/temu-pinduoduo-owner-pdd-faces-profit-challenge-amid-trump-tariffs-domestic-competition
[4] https://seekingalpha.com/article/4790710-pdd-holdings-q1-resilient-growth-amid-chinas-macro-storm