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PDD approaches 3-year high as stock jumps 18% following earnings

AInvestWednesday, Mar 20, 2024 9:54 am ET
1min read

PDD Holdings, a Chinese commerce group, reported its Q4 (Dec) 2022 earnings results, surpassing analysts' expectations. Shares have rallied 18% in the pre-market as the company sees significant growth in its online endeavors. The stock trades at $150, just shy of its three year high of $152 set back in April 2021.  

The company reported earnings of RMB 17.32 per share, which is RMB 6.04 better than the consensus of RMB 11.28. This strong performance was accompanied by a 123.2% year-over-year increase in revenues, reaching RMB 88.88 billion, surpassing the RMB 79.53 billion consensus. 

The robust user growth and sales on PDD's global platform, Temu, significantly contributed to the earnings beat in Q4. Temu is an online marketplace launched in the US in September 2022. It offers heavily discounted consumer goods mostly shipped directly from China. The platform has expanded its presence to 49 countries, including Australia and various European nations, by January 2024. Revenues from online marketing services and others reached RMB48,675.6 million (US$6,855.8 million), representing a 57% increase year-over-year. Meanwhile, revenues from transaction services grew by 357%, reaching RMB40,205.4 million (US$5,662.8 million). 

Total costs of revenues experienced a notable rise of 293% to RMB 35,078.3 million due to increased fees for fulfillment, payment processing, maintenance, and call center expenses. Additionally, total operating expenses rose by 44% to RMB 31,407.8 million, primarily driven by higher sales and marketing expenses. Sales and marketing expenses for the quarter totaled RMB 26,638.5 million, a 50% increase from the same period in the previous year. This surge was mainly attributed to elevated spending on promotional and advertising activities.

Meanwhile, general and administrative expenses increased to RMB 1,904.8 million, compared to RMB 1,640.5 million in the fourth quarter of 2022. Research and development expenses for the quarter reached RMB 2,864.4 million, compared to RMB 2,406.7 million in the same period last year.

Operating profit for the quarter was RMB22,395.0 million (US$3,154.3 million), representing a 146% increase year-over-year. Non-GAAP operating profit increased by 112% to RMB24,579.9 million (US$3,462.0 million). 

Net income attributable to ordinary shareholders for the quarter was RMB23,280.3 million (US$3,279.0 million), a 146% increase from the same quarter in 2022. 

PDD Holdings aims to bring more businesses and people into the digital economy, particularly focusing on local communities and small businesses. In the recent earnings report, the company demonstrated its strong growth potential and ability to outperform market expectations, driven by its expanding user base and successful sales strategies. As the company continues to expand its e-commerce platforms and reach new markets, it will be interesting to observe its future performance and growth trajectory.


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