search icon

    Market Snapshot

    blog search icon

    PDD Rises Fast Despite Missing Earnings Target

    By Wasim Omar

    Mar 22,2022

    8:30 AM UTC

    Pinduoduo Inc. (NASDAQ: PDD) is going through significant gains in today’s current market, climbing upwards of 16.7%, in one hour. This climb in the first hour of trade comes after high volatility and a substantial growth spurt in the premarket. In fact, the shoot-up in price traces back to yesterday’s session. The China-based agricultural tech company saw a swift rise as part of a broader China growth wave, throughout last week. This growth wave reversed a month-long bearish slide, giving PDD substantial momentum to push onwards and excel in the market. The recent spurt, however, comes despite Pinduoduo missing its earnings targets in its latest report.

    Pinduoduo Earnings Release

    The following domains were the highlights of Pinduoduo’s latest earnings release:

    • Revenue shot up from RMB 59.5B to RMB 93.9B from 2020 to 2021. Although impressive, this was caused by the signing on of various marketing agencies and similar services, driving volume to Pinduoduo. The percentage increase in revenue amounts to 58%.
    • Cost of Revenue increased from RMB 19.3B to RMB 31.7B. This increase amounts to a staggering 65%, given the costs of marketing agencies and other digital services. This demonstrates that the high revenue comes far more costly to PDD.
    • Similarly operating costs shot up from RMB 49.6B to RMB 55.3B, further increasing the cost burden on the revenue growth for PDD.
    • In 2021, Pinuoduo turned over its operating loss of RMB 9.3B to a profit of RMB 6.8B.
    • Net loss from last year also saw a turnaround from RMB 7.1B to a net profit of RMB 7.7B.

    Although apparently impressive, the company had failed in meeting its growth expectations. The quarterly revenue growth was anticipated as being much higher, compared to the previous year’s final quarter.

    PDD Business Prospects

    This year marked a strategic shift for Pinuoduo, away from marketing and sales, and on towards research and development. This move enhances PDD’s long-term growth prospects, creating a positive sentiment surrounding the stock in the market. Moreover, current confidence surrounding Chinese stocks is acting as a further boost to PDD.

    Conclusion

    PDD is currently undergoing a growth spurt in the market, given a frenzy surrounding the stock. This links to a recent earnings release which shows Pinuoduo, despite missing its target, has still achieved substantial sequential annual growth. Furthermore, the company’s shift from sales to research and development further creates optimism, amidst the broader Chinese growth wave.

    More From Stocks telegraph