PDD Q2 Earnings : Revenue, Profitability will turn downward trend, stock tumbles nearly 30%

PDD reported disappointing Q2 results, revenue grew from a year earlier to $13.36 billion, but missed Wall Street’s estimates of $14.03 billion. After the report, PDD's share price fell 28.5% Monday to $100, their largest single-day percentage decrease ever.

Here are Pinduoduo Conference Call Takeaways:

• As shown in this quarter's results, high revenue growth is not sustainable, and unavoidable that profitability will turn lower over the long term.
• Pinduoduo have already started a new round of investments in operations and with R&D, management team believe that sacrificing short term profit is necessary, A clear downward trend in profit is expected.
• For global business (Temu), the rapid shifts in external environment, which brought significantly greater uncertainty. Our operations has also become increasingly affected by non-business factors. And meanwhile, the competition we face is growing stronger.
• In the foreseeable years ahead, is not an appropriate time for share repurchases or dividends.
• Empowering and supporting merchants is crucial to building our high quality supply chain and also creating a robust platform ecosystem. Number of new merchants and new products support our platforms saw meaningful growth.

Goldman Sachs: PDD is A Good Undervalued Stock, Keep Buy Rating

After Q2 Earnings, Goldman Sachs believed that the decline in PDD's share price has been over-done as the market underestimated the ecosystem enhancement of PDD's China business; a clearer outlook for GMV growth; and a dramatic shift in its previously aggressive ad monetization policy, bringing its merchants better benefit and other factors.

Based on the above factors, Goldman Sachs lowered its online marketing revenue growth forecast for PDD, and chopped its target price from US$184 to US$165 at the same time, keeping rating at Buy.