Morgan Stanley analyst Eddy Wang reiterated an Overweight rating and $150.00 price target on Pinduoduo Inc. (NASDAQ: PDD).

The analyst comments "PDD is due to report its 1Q25 results on May 27. We think its 1Q OMS revenue growth and non-GAAP net profit could be the next share price catalyst. We expect OMS revenue to achieve 11% YoY growth, which implies 18% GMV growth, and its nonGAAP net profit to reach Rmb28bn. What and when is the catalyst? PDD is scheduled to release its 1Q25 financial results on Tuesday May 27. We believe its 1Q25 OMS (online marketing services) revenue growth and non-GAAP net profit could be the next share price catalyst. We expect OMS to grow 11% YoY in 1Q25 and non-GAAP net profit to reach Rmb28bn. We forecast PDD's domestic GMV to grow 18% YoY in 1Q25, outpacing industry growth of 6% YoY, as we believe PDD continues to gain market share. We expect OMS revenue growth will be slower than GMV growth, as PDD continues to offer more support/subsidy to merchants, which could lead to a lower take rate in 1Q25. With a relatively high earnings base from 1Q24, together with PDD's more subsidies to both its merchants and consumers, which could be partially offset by less spending in Temu US, we forecast PDD's non-GAAP net profit to reach Rmb28bn in 1Q25 (down 8% YoY). What are the potential outcomes for this event? Scenario 1: 1Q25 OMS revenue growth of 11-14% YoY, and non-GAAP net profit of Rmb27-28bn, our current expectation. Scenario 2: 1Q25 OMS revenue growth of 15-20% YoY, and non-GAAP net profit of Rmb29-30bn, more optimistic than we expect. Scenario 3: 1Q25 OMS revenue growth below 10% YoY and non-GAAP net profit below Rmb25bn, more conservative than we expect. What are the potential stock implications for these outcomes? Scenario 1: PDD's share price moves up 0-5%. Scenario 2: PDD's share price moves up 5-15%. Scenario 3: PDD's share price moves down >10%. What is our base case expectation for this event? Scenario 1 is our base case expectation, to which we assign a 60% probability."

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Shares of Pinduoduo Inc. closed at $119.80 yesterday.