Despite the absence of significant proprietary news on Tuesday, PDD Holdings saw its stock impacted by recent analyst actions. Several analysts monitoring the Chinese e-commerce giant reduced their price targets following the company’s latest earnings release, with one even downgrading her recommendation, prompting a sell-off by the market.
PDD’s American depositary receipts (ADRs) closed the day over 4% lower, in stark contrast to the modest 0.2% gain of the S&P 500 index.
Concerns Regarding the Company’s Second Quarter and Its Prospects
While PDD exhibited robust growth in some of its second-quarter metrics, it fell short of the consensus revenue estimate, though it did surpass expectations in terms of profitability. The management’s cautionary remarks about challenging times ahead further dampened investor confidence.
These developments, along with other concerns, alarmed several analysts following the stock. Citigroup’s Alicia Yap notably downgraded her recommendation from a buy to neutral. She also slashed her PDD price target from $194 per ADR to $120.
Yap expressed an uncertain outlook for PDD’s future, stating in a new research note, “Given limited investor communication and the lack of operating metrics and financial breakdown disclosure, coupled with management’s intentional/proactive cautious outlook comment, the stock will likely be range-bound until PDD can regain investor confidence through several quarters of consistent result beat.”
Analysts Making Adjustments
While other analysts stopped short of downgrading their PDD recommendations, several still trimmed their price targets on Tuesday. Among them was Bank of America’s Joyce Lu, who now assesses the stock’s fair value at $170 per ADR, down from her previous estimate of $206, though she continues to recommend buying the stock. Likewise, Goldman Sachs analyst Ronald Keung reduced his target from $184 per ADR to $165 while maintaining his buy rating.
