PDD stock price forecast as Temu growth gains steam

PDD (NASDAQ: PDD) stock price continued its strong bullish trend this week after the company published strong financial results. The stock surged to a high of $138.40, the highest point since June 1st. It has risen by more than 490% from the lowest level this year.

Pinduoduo is one of the biggest e-commerce companies in the world. It has millions of customers, mostly in China. Recently, the company has been pushing Temu, its highly popular e-commerce platform.

In a statement, the company said that its total revenue rose by 94% YoY to over $9.4 billion. The strong revenue growth was because of weak comparables since China was in a lockdown mode in 2022. 

Its operating profits jumped by 60% to $2.28 billion while its net income jumped to over $2.1 billion. The company attributed this growth to its innovation, growing market share, and improved supply chains. 

By segment, PDD Holdings said that its online marketing services revenues rose by 39% to $5.4 billion. Transaction revenue jumped by 315% to almost $4 billion. These results mean that the company is doing well.

Internationally, PDD Holdings growth is being driven by Temu, which has been growing at a fast pace. The most recent data shows that the number of American customers grew from 5.8 million in October 2022 to over 104.2 million.

Temu is investing heavily in marketing in a bid to boost its market share. In its last quarter, PDD Holdings spent over $2.8 billion, a 55% increase from the same quarter in 2022. The goal for now is not profitability but to gain market share in a highly competitive market.

The biggest risk for Temu is that profitability could take longer than expected. A good example of this is ContextLogic, the parent company of Wish.com. After showing spectacular revenue growth a few years ago, its revenue has slipped to just $357 million in TTM. Its net loss also jumped to over $359 million.

PDD chart by TradingView

The weekly chart shows that the PDD Holdings stock price has done as I predicted a few weeks ago. It has flipped the important resistance point at $106.77 (January 23rd high) into a support level. This price was the upper side of the ascending triangle pattern.

The shares moved above the 50-week moving average. At the same time, the shares are trading at the 38.2% Fibonacci Retracement level. Therefore, the outlook for the stock is still bullish, with the next point to watch being at $166, the 23.6% retracement point.

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