PDD Stock Rallies 12% on Blowout Earnings: Should You Buy Now?

Shares of PDD Holdings (NASDAQ: PDD) were slammed on Tuesday after the Chinese e-commerce giant’s first-quarter 2025 earnings fell well short of Wall Street expectations, raising fresh questions about the growth path of its fast-rising Temu marketplace amid intensifying trade and competitive pressures. First-quarter snapshot • Revenue: RMB 95.67 billion (≈ US $13.18 billion), up 10 % year-over-year but below analyst consensus of roughly RMB 98 billion. • Net profit: RMB 14.74 billion, a 47 % slide from the prior year. • Diluted EPS: RMB 10.30 versus RMB 19.21 a year ago. • Active buyers on Temu and Pinduoduo combined climbed 7 % to 969 million. Market reaction PDD stock opened down nearly 18 %, erasing almost all of its 2025 gains, and settled midday around US $98 after heavier-than-average volume. The sudden sell-off pushed the ADRs below their 200-day moving average, triggering technical sell signals noted by several trading desks. What went wrong Management blamed larger-than-expected logistics subsidies tied to Temu’s global expansion, a surge in marketing outlays ahead of key U.S. shopping events, and a “complex external environment,” an apparent nod to the Trump campaign’s proposal of a 60 % blanket tariff on Chinese imports if elected in November. CFO Jun Liu acknowledged that “margin volatility will likely persist in the near term as we prioritize user acquisition.” Key pressure points for investors 1. Rising tariffs risk: Roughly 34 % of Temu’s gross merchandise value now comes from U.S. consumers, exposing PDD to potential tariff shocks. 2. Competitive ad spend: Temu’s U.S. app-install budget is tracking more than double Q4 levels, hurting operating leverage. 3. Slowing domestic growth: Pinduoduo’s agricultural supply chain subsidies lifted rural orders but compressed overall take rates. Analyst chatter • Citi slashed its price target to US $135 from US $175, citing “diminished profitability visibility.” • Morgan Stanley kept an Overweight rating but warned that “headline risk around tariffs could cap multiple expansion for much of 2025.” • Local broker CICC argued the pull-back offers “an attractive entry point” if Temu can tame marketing intensity by Q3. Outlook PDD guided for “mid-teens” percentage revenue growth in Q2, below prior street models closer to 22 %. Executives said a new in-house logistics hub in Mexico and cross-border warehouses in Germany and Australia should pare shipping costs in the second half, but investors remain skeptical until margins stabilize. Bottom line PDD stock’s post-earnings plunge underscores how the market is shifting focus from raw topline acceleration to sustainable profit growth. Until management proves Temu can scale without endless subsidies—and until the U.S. tariff landscape clears—volatility is likely to remain the defining theme for PDD Holdings shares in 2025.