PDD Holdings, the parent company of discount marketplace Temu, saw a significant increase in its American depositary receipts (ADRs) following the release of its first-quarter report that exceeded market expectations. Continuing the trend from the previous quarter, PDD's revenue more than doubled year-over-year, reaching 86.81 billion Chinese yuan ($12.02 billion), a marked increase from CNY37.64 billion last year, and well above the financial forecast of CNY76.38 billion.
In the same vein, PDD tripled its profits in comparison to last year, reporting CNY28 billion for the quarter, a substantial jump from CNY8.1 billion a year prior, and doubling the projected estimates of CNY13.02 billion. The company noted a diluted earnings per share (EPS) of CNY4.74, in clear defiance of the predicted CNY2.25.
Since its inception in the US market in September 2022, Temu has experienced consistent growth, enabling PDD to exceed market expectations in subsequent earning reports over the last year. The company further caught public attention after securing several advertising slots during the Super Bowl earlier this year; however, this has also attracted criticism and scrutiny of Temu's operational model.
Both Temu and its competitor, Chinese fast-fashion company Shein, have faced accusations of benefiting from forced labor due to their reliance on thousands of different suppliers. These allegations were addressed in a June 2023 House committee report, but both companies vehemently deny these claims.
In March, Jefferies analysts upgraded their rating for PDD from "hold" to "buy" noting that geopolitical risks were adequately factored into the price, and that Temu's growth in both domestic and overseas markets remains unwavering. As a result of its successful Q1 report, the company's ADRs rose 5.4% to $153.31 on Wednesday and have more than doubled in value over the last year.