PDD Holdings Earnings On Deck – Stock Trading Higher (NASDAQ:PDD)

PDD Holdings Inc. (NASDAQ: PDD), the parent company of e-commerce giants Pinduoduo and Temu, heads into earnings this morning in bullish fettle. While PDD's stock price currently trades at $127.11, up $4.13 (3.36%) from its previous close, and a further 2.67% pre-market pushing the price to $130, the breakout above the $120 level is proving strong.

This morning's earnings report looms large, promising to either validate its strategies or expose further vulnerabilities.

Markets are looking for an EPS of $2.06 (CNY 14.80) on revenue of $14.4B (CNY 103.2B), a 6.3% Y/Y growth rate. This estimate underscores the market's expectation for a rebound after the disappointing $1.59 EPS reported in Q1, which missed consensus estimates by almost 40%. Whether PDD can deliver on these expectations remains to be seen.

Technical indicators paint a cautiously optimistic picture. PDD's 50-day and 200-day simple moving averages (SMAs) stand at $108.74 and $109.53, respectively. The fact that the current stock price remains above both these averages suggests a “Buy” signal based on historical price trends. However, relying solely on these indicators would be imprudent, given the fundamental challenges PDD faces.

The company's recent Q1 2025 financial performance offers a mixed bag. Revenues reached 95.67 billion yuan (approximately $13.30 billion), a 10% year-over-year increase, driven by online marketing and transaction services. However, this figure fell short of the projected 102.51 billion yuan, highlighting a potential slowdown in growth momentum. More concerning was the 47% year-over-year decline in net income, settling at 14.74 billion yuan. This drop was attributed to intensified competition and increased operating expenses, reflecting the pressures of a fiercely contested e-commerce landscape.

PDD's struggles are intricately linked to the broader economic climate in China. Weak consumer sentiment, stemming from a prolonged property crisis and rising unemployment, has dampened demand on its flagship platform, Pinduoduo. Despite aggressive price cuts and government stimulus measures, PDD has found it challenging to stimulate significant growth in its domestic market. The competitive landscape, dominated by giants like Alibaba and JD.com, has further intensified the pressure, leading to price wars that erode profit margins.

In contrast, PDD's international expansion through Temu presents a different set of opportunities and challenges. Temu's strategy of shipping directly from Chinese warehouses to Western consumers, leveraging the “de minimis” tariff exemption in the U.S., has allowed it to offer competitively priced goods. However, this strategy is not without its risks.

In response to these challenges, PDD has launched a 100 billion yuan support program aimed at assisting merchants and enhancing the quality of supply and demand on its platforms. This initiative signals a commitment to long-term investments in its ecosystem, prioritizing the needs of merchants and consumers over short-term profitability.

Looking back at the stock for clues, the breakout above $120, a level that has provided plenty of resistance in recent times has moved PDD outside of this consolidation channel. With PDD's stock price having added 31% YTD leading in to earnings, it is clear that there is a bullish narrative taking hold that could either breakdown, or break to the upside of the back of the print. It is likely to be volatile if previous reports are any guide.