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Citi reiterates Neutral stance on Pinduoduo shares amid tariff concerns

EditorNatashya Angelica
Published 11/12/2024, 12:52

PDD
-1.44%

On Wednesday, Citi maintained its Neutral rating and $125.00 stock price target for Pinduoduo Inc. (NASDAQ:PDD), reflecting potential challenges the company may face due to geopolitical factors. According to InvestingPro data, analyst targets range from $101.84 to $230.82, with the stock currently trading at $104.49. Despite recent headwinds, InvestingPro analysis indicates the stock is currently undervalued.

The firm highlighted concerns over the proposed 25% tax on products from Mexico by President-elect Donald Trump, which could affect Chinese suppliers and exporters that have traditionally routed goods through Mexico to the United States.

The analyst at Citi expressed that the tax could lead to increased costs for Temu's parcel deliveries in the near future. This observation is based on the pattern of rising exports from China to Mexico and subsequently from Mexico to the U.S. in recent years.

The analyst also noted that the feedback from merchants regarding semi-managed models in the U.S. has been lukewarm, indicating limited support to counteract the risks associated with the potential tariff increase. Despite these challenges, InvestingPro data shows impressive gross profit margins of 62.06% and strong revenue growth of 87.39% over the last twelve months.

Pinduoduo's operations are not just limited to the U.S. market. According to Citi's analysis, the company is also encountering challenges in Vietnam and is burdened by high operational costs in Brazil. These factors contribute to the short-term headwinds that Pinduoduo may face in terms of profitability.

Citi's stance remains unchanged, advising a cautious approach to Pinduoduo's stock due to the various challenges it is expected to confront in the immediate future. The firm's classification of the stock as Neutral / High Risk suggests that investors should be aware of the potential difficulties Pinduoduo could encounter, which may impact its financial performance.

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In other recent news, Pinduoduo Inc. has been the focus of several analysts' reports. Bernstein SocGen Group reiterated an Outperform rating on the company, emphasizing the potential of Pinduoduo's cross-border e-commerce platform, Temu.

In the broader market, US-listed Chinese stocks, including Pinduoduo, experienced a downturn after a significant rally driven by promises from Chinese policymakers to enhance economic growth. This rally had seen the KraneShares CSI China Internet ETF, which tracks the performance of Chinese internet companies, surge by 10%. However, it later dropped by 5.1%.

These are recent developments that have been influenced by China's shift towards more accommodating monetary and fiscal policies. This change in policy was met with a positive response from the market, resulting in a notable rally of US stocks with significant ties to China. The market is now keenly anticipating the outcomes of China's Central Economic Work Conference for further economic directives.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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