Temu parent PDD's stock climbs as improving consumer sentiment fuels profit beat

By Tomi Kilgore

Revenue more than doubles to beat forecasts by a wide margin, as transaction-services revenue more than quadrupled

The U.S.-listed shares of PDD Holdings Inc. powered higher Wednesday, after the China-based e-commerce company and parent of the Temu marketplace reported fourth-quarter earnings that rose well above expectations, citing signs of improving consumer spending.

The stock (PDD) soared as much as 16.1% to an intraday high of $148.30 soon after the open, the highest price seen since Jan. 12, before pulling back to be up 2.7% in afternoon trading.

"In the fourth quarter, we saw growing demand driven by encouraging consumer sentiment," said co-Chief Executive Jiazhen Zhao.

"In 2024, we remain dedicated to further improving consumer experiences, enhancing technology innovations, and generating positive impacts in our communities," added co-Chief Executive Lei Chen.

PDD's outlook for an improving consumer comes after data out earlier this week showed China's economy was coming out of its slump. Industrial output for the January-February period saw the fastest growth in two years and retail sales data beat expectations.

For the quarter to Dec. 31, PDD said net income jumped to RMB23.28 billion ($3.28 billion), or RMB15.83 a share, from RMB9.45 billion, or RMB6.52 a share, in the same period a year ago. Excluding nonrecurring items, adjusted earnings per share of RMB17.32 beat the FactSet consensus of RMB11.28.

Revenue climbed 123% to RMB88.88 billion ($12.52 billion), above the FactSet consensus of RMB79.53 billion.

Revenue from online marketing services increased 57% to RMB48.68 billion, while revenue from transaction services rocketed 357% to RMB40.21 billion.

The results come after The Information reported earlier this week that Temu is looking to cut the share of its business from the U.S. in half, to as low as 30% of total merchandise sales from the current 60%, as political tensions rise between the U.S. and China.

PDD's stock has dropped 10.4% year-to-date, while the iShares MSCI China ETF (MCHI) has slipped 1.3% and the S&P 500 has gained 8.5%.

-Tomi Kilgore

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03-20-24 1343ET

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