Pinduoduo Inc. (PDD) PT Lowered to $93 at HSBC

HSBC analyst Binnie Wong lowered the price target on Pinduoduo Inc. (NASDAQ: PDD) to $93.00 (from $96.00) while maintaining a Hold rating but believes a positive inflection point is near.

The analyst is turning more constructive on PDD’s fundamentals post results stating "2Q result serves as a testimony of PDD’s profit potential with non-GAAP net loss margin narrowed to 1% on marketing efficiency amid a heavy promotion season. Management still prioritizes growth over profitability hence we should expect fluctuating losses into 2H. With active buyers reaching 683m, 92% of Alibaba, PDD expects to continue investing in user engagement to improve ARPU, partly offset by less favourable category mix shift to household necessities and FMCG. PDD launched RMB100m subsidy program on designated SKUs in 3C products and accessories on 30 Jul, ‘RMB10bn shopping festival’ during 8-10 Aug on high-ticket size SKUs including mobile phones and international cosmetic brands. On the monetisation side, PDD expects its high ROI to continue to entice more online marketing budget as it continues to improve analytical tools. We narrowed FY20/21e non-GAAP loss by 13/21% however lowered FY22e earnings by 14%, hence TP is trimmed from USD96 to USD93. Yet, we think valuation remains stretch".

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