PDD trades near cheapest level ever amid geopolitical risks
NEW YORK: Shares of Temu parent PDD Holdings Inc are being held back by geopolitical risks and fierce competition in China’s eCommerce sector.

Granted, its US-listed stock has surged 43% from a March low, but it’s still trading at just 13 times expected earnings for the next year. That’s half the valuation of the Nasdaq 100, marking PDD’s steepest discount on record.

That might seem like a great bargain for a firm that more than doubled sales in the latest quarter, a pace of growth second only to Nvidia Corp’s on the tech-focused index.

Some see the gap as justified given the harsh trade-war rhetoric from Beijing and both candidates in the upcoming US presidential poll.

“People are worried about election risks and potential tariffs coming for PDD, leading many to attach zero or even negative value to Temu,” said Shuyan Feng, deputy general manager for investment management at Huatai Asset Management in Hong Kong.

PDD’s earnings more than tripled in the March-ended quarter as the company successfully pushed its budget eCommerce model into overseas markets.

The high growth in Temu has drawn scrutiny in key Western markets, with European complaints that the Chinese online marketplace fails to protect consumers.

Troubles run deeper in the United States, where lawmakers have alleged Temu and rival Shein exploit loopholes to the disadvantage of US competitors.

The US government’s recent order for ByteDance Ltd to divest TikTok has piled further pressure on fellow Chinese Internet firms.

Intense rivalry within China is another source of worry.

After ceding market share for years, PDD’s arch-rival Alibaba Group Holding Ltd posted double-digit growth in gross merchandise value in the latest quarter.

Sales growth also quickened at JD.com Inc, which has slashed prices and ramped up perks to woo shoppers.

Not that investors have been avoiding PDD. Its 43% gain since March is 10 times the advance in the Nasdaq 100. But that’s been far outpaced by the nearly 60% rise in forward earnings estimates in the same span of time. — Bloomberg
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Shares of Temu parent PDD Holdings Inc are being held back by geopolitical risks and fierce competition in China’s eCommerce sector.