news

한어Русский языкEnglishFrançaisIndonesianSanskrit日本語DeutschPortuguêsΕλληνικάespañolItalianoSuomalainenLatina

produced by radar finance | edited by li yihui | deep sea

on august 26, pinduoduo's stock price fell 28.51%, and its market value evaporated by us$55.37 billion in a single day, equivalent to rmb 394.6 billion, marking the largest drop since its ipo.

behind the record decline, pinduoduo's revenue in the second quarter fell short of expectations. during the same period, its non-gaap net profit increased by 125% year-on-year to approximately 34.4 billion yuan, but the growth rate was lower than the more than 2% increase in the first quarter.

in addition to the lower-than-expected performance, the warning from management further dampened market confidence. whether in the financial report or in the earnings call, pinduoduo's management emphasized that looking ahead, revenue growth will inevitably face pressure due to intensified competition and external challenges; at the same time, management said, "as we continue to invest firmly, we are prepared to accept short-term sacrifices and potential declines in profitability."

over the past period of time, the e-commerce market has been sluggish and the industry has entered a deep water zone. pinduoduo is also in a new investment period, but fortunately its growth is still impressive. however, the second quarter performance of pinduoduo has exposed the challenges of pinduoduo's domestic main site growth rate being lower than expected and the increasing uncertainty of its global business, which has made investors "finally worried".

under this circumstance, pinduoduo's management decided to cut itself off and continue to "roll", focusing its investment on long-term factors such as building a sustainable ecosystem and cultivating high-quality merchants.in the past, the low-price strategy has helped this e-commerce platform achieve remarkable results, but in the era of price wars, pinduoduo needs to find a new moat.

the stock price suffered a "death in the light"

tianyancha data shows that pinduoduo's domestic entity is shanghai xunmeng information technology co., ltd., which has completed eight rounds of financing.

on august 26, pinduoduo released its second quarter 2024 financial report ending june 30.

in the second quarter, pinduoduo achieved total revenue of 97.06 billion yuan, an increase of 86% over the same quarter of 2023, but still lower than the market expectation of 99.985 billion yuan, and just one step away from the 100 billion yuan revenue mark.

such a growth rate is very impressive in the e-commerce industry, where revenue is generally in the single digits this year. however, compared with pinduoduo itself, this is the first time in the past four quarters that its single-quarter revenue growth rate has been less than 90%.

according to ifind data from tonghuashun, from the third quarter of 2023 to the first quarter of 2024, pinduoduo's revenue growth rate was above 90%, namely 94%, 123% and 131% respectively.

in addition to the cooling of revenue, pinduoduo's profit growth rate also slowed down on a month-on-month basis.

the financial report shows that pinduoduo's net profit attributable to ordinary shareholders in the quarter was 32.009 billion yuan, a year-on-year increase of 144%. excluding the impact of equity incentive expenses and changes in the fair value of long-term investments, the net profit attributable to ordinary shareholders under non-gaap (non-us generally accepted accounting principles) was 34.432 billion yuan, a year-on-year increase of 125%, higher than the market expectation of 30.1 billion yuan.

in contrast, in the first quarter of 2024, pinduoduo's net profit attributable to ordinary shareholders increased by 246% year-on-year; on a non-gaap basis, it increased by 202% year-on-year.

once the results were announced, pinduoduo's stock price plummeted by nearly 30% overnight, its biggest drop since its ipo, and its market value evaporated by nearly 400 billion yuan in a single day.

goldman sachs believes that this sharp negative reaction may be due to three reasons. first, investors' expectations were high before the earnings report was released. due to the strong market expectations, pingduoduo's stock price has risen by about 20% since the end of july, while the china internet etf index (kweb index) has fallen by 4% during the same period.

secondly, pinduoduo's online marketing service growth showed the first sign of normalization, slowing down to 29% year-on-year, which was lower than market expectations. however, goldman sachs believes that pinduoduo's performance is still significantly better than alibaba's 1% growth in customer management revenue and the median growth of kuaishou's e-commerce advertising.

finally, management's comments scared the market. pinduoduo's management pointed out in a conference call that due to intensified competition and possible decline in long-term profitability to promote high-quality development, future revenue growth is expected to slow down and sacrifice short-term profits; pinduoduo plans to set aside 10 billion yuan in the next 12 months to support high-quality merchants; as the overall market is still in the investment stage, pinduoduo will not repurchase or distribute dividends in the next few years.

the two pillars driving pinduoduo's revenue growth have always been the increase in revenue from its overseas business temu and the growth in domestic advertising revenue. but now, these two engines are running slower.

looking at each business specifically, in the second quarter, pinduoduo's online marketing services and other services (advertising) revenue was 49.12 billion yuan, a year-on-year increase of 29%; transaction service revenue (commission) was 47.94 billion yuan, a year-on-year increase of 234%.

among them, online marketing services and other income are the fees paid by merchants to pinduoduo to purchase advertising space and web search keywords in order to increase sales based on user search keywords and browsing locations. therefore, it is also regarded as an indicator reflecting the business situation of the domestic main site.

in the last quarter, pinduoduo's online marketing service revenue and other revenues grew by 56% year-on-year. according to dolphin investment research, the median expected growth rate of this indicator for the quarter by the buyer is around 40%, but in the end, the growth rate of pinduoduo's core indicator advertising revenue was only 29% this quarter, which was significantly lower than expected.

transaction service revenue refers to commission income. for every transaction completed by a merchant, pinduoduo will charge a commission based on a percentage of the transaction amount. this quarter, pinduoduo's transaction service revenue was also lower than expected, with bloomberg's consensus expectation of about 50 billion. last quarter, the company's year-on-year growth rate in this revenue was 327%.

it is worth noting that the transaction service revenue mainly comes from the overseas business temu, but it also includes the commission income of the main site based on the transaction volume and the commission income of duoduomaicai.

however, considering that the main site commission and duoduo maicai commission are relatively stable, pinduoduo's transaction service revenue slowed down in the second quarter, implying that the growth rate of revenue from its overseas business temu is slowing down.

high growth faces pressure

judging from the stock price performance, pinduoduo's slowing growth has not satisfied the market. however, the company's management is still "blowing cold wind" about the future.

"in the past quarter, our revenue growth slowed down quarter-on-quarter. looking ahead, revenue growth will inevitably face pressure due to intensified competition and external challenges," said liu jun, pinduoduo's vice president of finance, in the financial report. "as we continue to invest firmly, profitability may also be affected."

in the post-performance conference call, chen lei reiterated that the profit growth in the past few quarters was the result of the asynchrony between the short-term investment cycle and the financial reporting cycle, and could not be used as a long-term guide. in addition, the company's business is currently facing fierce competition and some external environmental factors, which will inevitably bring fluctuations to business development and slow down revenue growth.

as for the reasons for the slowdown in revenue, it is not difficult to see from the management's statement that on the one hand, competition in the domestic market continues to intensify, and on the other hand, uncertainty in overseas business has increased.

zhao jiazhen, executive director and co-ceo of pinduoduo, said that "competition" is inevitable as the main theme of the e-commerce industry, and the overall competitive environment has been intensifying in the past few quarters. in such a fierce competitive environment, pinduoduo's revenue growth may slow down. the just-concluded second quarter showed that high growth is unsustainable.

in terms of overseas business, since the launch of temu in september 2022, the business has grown rapidly. chen lei said that in this process, "compliance" has always been regarded as an important prerequisite for development.

however, as the business develops, the company feels that changes in the external environment are accelerating, global business operations are increasingly interfered with by abnormal business factors, and uncertainty has increased significantly.

chen lei pointed out that the current fierce industry competition coupled with the impact of some external environmental factors will inevitably bring fluctuations to future business development.

goldman sachs also believes that pinduoduo's international business has improved its profit margin quarter by quarter due to reduced subsidy levels and strict control of procurement prices in mature markets such as the united states. however, it points out that geopolitical headwinds may be greater than expected when entering europe and other developed markets with strong consumer power.

sacrifice profits and increase investment

in order to cope with market competition, pinduoduo regards this year as an important year for increasing investment, but increased investment also means compressing profit margins.

according to chen lei's latest statement, pinduoduo has entered a new stage of investment. improving ecological construction is not a one-night job, but the management has reached a consensus and is ready to sacrifice short-term profits and make long-term investments.

next, in order to support the sustainable development of the platform ecology, pinduoduo will increase its investment and support high-quality merchants in the next 12 months.in this case, the company's short-term profits cannot be ruled out to fluctuate, but the general trend of a gradual decline in profits is inevitable.

pinduoduo realizes that high-quality merchants are the key to the healthy development of the platform ecosystem. therefore, this round of investment is also focused on this.

on the one hand, on the supply side, pinduoduo will invest tens of billions of resources to support smart merchants and mental industrial belts with product and technological innovation capabilities, and significantly reduce transaction fees for high-quality merchants; on the other hand, it will resolutely carry out ecological governance of the platform and merchants, crack down on illegal cheating merchants, and firmly manage low-quality merchants.

a phenomenon worthy of attention is that domestic e-commerce platforms had previously followed pinduoduo's low-price strategy, and for a while all platforms were involved in low-price competition this year, but in the past two quarters, pinduoduo no longer mentioned low prices as the core.

radar finance noticed that in may, the state administration for market regulation promulgated the "interim provisions on anti-unfair competition on the internet", which defined and attributed many operational chaos in the e-commerce industry and will be officially implemented on september 1 this year.

according to the beijing municipal administration for market regulation, on august 22, under the guidance of the market supervision departments of beijing, zhejiang and shanghai, jd.com, taobao, pinduoduo, douyin, and kuaishou jointly signed the "self-discipline convention on compliance and operation of online transactions", and issued initiatives in five aspects: implementing platform responsibilities, protecting consumer rights, strictly prohibiting unfair competition, regulating pricing behavior, and collaborative governance between government and enterprises.

industry analysts believe that under the guidance of policies, major e-commerce platforms are weakening their low-price strategies, starting to pay more attention to gmv, and investing in optimizing user rights, services, and merchant ecology.

when the entire industry abandons its low-price strategy, pinduoduo, which started out with the "price-performance ratio" route, needs to find competitive advantages at a more multidimensional level. this may be one of the reasons why it emphasizes increasing investment in directions that are beneficial to the long-term and healthy development of the platform.

however, such investment to ease competitive pressure also makes pinduoduo's high profits unsustainable. after investors "voted with their feet" and its market value evaporated by nearly 400 billion, has pinduoduo's development reached a turning point?