Pinduoduo Inc. (NASDAQ: PDD) announced its Q4 2021 earnings on Monday, March 21, 2022, in which it topped earnings estimates but missed on revenue forecasts.
What to look for
Earnings: Stockearning’s Estimated EPS per basic ADS was $0.83 (RMB5.26) while diluted earnings were $0.73 (RMB4.66) relative to a basic and diluted net loss of RMB1.13 per ADS inQ4 2020. On a non-GAAP basis, the company had earnings of $0.92 (RMB5.88) compared to non-GAAP diluted net loss per share of RMB0.15 in Q4 2020. Analysts had predicted earnings of RMB2.38. In the last quarter, the company produced 1000% with actual EPS of $0.22. Historical EPS Performance shows that the company has in the past 12 quarters topped earnings estimates eight times (57%) and missed four times (28%).
Revenue: The company reported total revenue of $4.273 billion (RMB27.230 billion), representing a YoY increase of 3% from Q4 2020. Analyst had predicted revenue of $MB"9.78 billion. The increase was attributable to an increase in transaction services and online marketing services revenue that was offset by a drop in merchandise sales revenue. Gross merchandise volume was RMB2.44 trillion, up from RMB1.67 trillion a year ago. For the whole year, total revenue was RMB93.949 billion ($14.742 billion), representing a YoY increase of 58%.
Stock Movement: PDD shares were up almost 5% premarket on Monday following the fourth-quarter earnings release. Interestingly, following the earnings release, the company's shares have in the past been seven times in the past 13 quarters. So, the historical price reaction suggests a 53% probability of the share price going DOWN following the earnings release. According to the Stockearning algorithm, the predicted volatility on the first day is +/-13%, while the predicted volatility on the seventh day is +/-11%.
What analysts are saying: JPMorgan analyst Andre Chang downgraded Pinduoduo from Buy to Sell and also lowered the price target from $105 to $23. While Chang believes that Pinduoduo has the prospects to surpass China's e-commerce sector in the coming years due to the reduced GMV per active customer, his sector checks with various brands indicate that advancement may be restricted in the near term and China's Internet segment may face further selloffs if valuation support is not provided, Chang tells investors.
Citi analyst Alicia Yao upgraded the stock from Hold to Buy and set a price target of $80. Yao believes that considering the selloff after the Q3 earnings, the shares are fairly priced. In a research note, Yap advises investors that PDD should be able to keep its earnings trend despite growing interest rate concerns and weak consumer trends. According to the analyst, the firm has "resilient" customer metrics as well as market gain potential from Duoduo Grocery.
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