PDD's Margin Pressure Likely to Ease in Coming Quarters -- Market Talk
0801 GMT - The pressure on PDD Holdings' margins from heavy spending to support merchants will likely be temporary, Nomura analysts Jialong Shi and Rachel Guo say in a research note. Such heavy expenditure is unusual and could be linked to the merchants' demonstration in July, they say, referring to the incident when a throng of Chinese merchants who supply Temu protested in China over "unfair penalties." PDD likely offered certain one-off compensation to calm the situation, the analysts add. While the company has cautioned that investment to support merchants, such as reducing some platform fees, could affect profitability, Nomura thinks the scale of these expenditures may be reduced in the coming quarters. The analysts keep a buy rating but lower the target price on ADRs to $137.00 from $164.00. PDD closed 11% lower at $104.09 on Thursday. (tracy.qu@wsj.com)
(END) Dow Jones Newswires
November 22, 2024 03:01 ET (08:01 GMT)
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