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On Monday, Morgan Stanley pinduoduo Inc. (NASDAQ:) is maintained with an Overweight rating and a price target of $181.00. The company expects that his Pinduoduo's fourth-quarter earnings release, scheduled for Wednesday, March 20, could be a catalyst for the company's stock price to rise. According to the company's analysis, Pinduoduo's online marketing services (OMS) revenue is likely to grow by a significant 47% year-on-year in Q4 2023.
OMS' revenue growth is expected to reflect 20% year-over-year growth in gross merchandise volume (GMV), which will outpace the broader e-commerce industry's growth rate of 7.3%. This outperformance is due to Pinduoduo's continued market share growth supported by its strategy of offering lower prices, which resonates with consumers' increased price sensitivity amid the overall consumption downturn.
Despite the potential for better-than-expected GMV and revenue growth from Pinduoduo's overseas platform Temu, Morgan Stanley does not believe this will be the main driver for the fourth quarter. As reported on February 23, 2024, concerns have been raised by US lawmakers about suspected forced labor at Temu's suppliers, leading to discussions of a shipping ban. Additionally, our increased investment in Temu may have a negative impact on our profitability in the current quarter.
Morgan Stanley outlined three potential scenarios for Pinduoduo's fourth-quarter OMS revenue growth. One is a base scenario of 45-50% growth, an optimistic scenario of over 50%, and a conservative scenario of less than 45%. Under the base scenario, which the company assigns a 50% probability, PDD stock could rise between 0% and 5%.
A more optimistic outcome could see the stock rise by 5% to 15%, while a weaker-than-expected growth could cause the stock to fall by 10% or more. Financial results on March 20 will reveal what scenario unfolds.
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