Temu Skyrocketed for Two Years — Then Its Parent Company Lost Over $50 Billion in Hours. What Just Happened?

Just recently, the stock shares in PDD Holdings, the parent company of the shopping Temu app, tanked over 30%. The fall wiped off over $50 billion in market value and sent shockwaves through e-commerce. The stock had led a dramatic downturn after the company issued lower-than-expected revenue results and issued a caution on forthcoming challenges potentially clipping its growth and profitability.

PDD Holdings, which is listed on the Nasdaq and has its technical headquarters in Ireland, runs significant online shopping platforms such as the Chinese giant Pinduoduo and Temu, a discount app that has captured the hearts of U.S. and Western shoppers since its launch in 2022. 

Trending:

• A billion-dollar investment strategy with minimums as low as $10 — you can become part of the next big real estate boom today.

However, as the company continues to expand, it has encountered mounting scrutiny from governments, especially in the United States, regarding its business practices, including the origins and quality of the products it sells and its strategic use of trade rules to gain an advantage.

Despite seeing revenue rise by 86% in the second quarter to $13.6 billion, PDD’s growth fell short of analyst expectations, predicting revenues to exceed $14 billion. This shortfall, coupled with a cautious outlook from company executives, sent investors running. Jun Liu, Chief Financial Officer of PDD, said, “Looking ahead, revenue growth will inevitably face pressure due to intensified competition and external challenges. Profitability will very likely be impacted as we continue to invest resolutely.”

Don't Miss:

• Amid the ongoing EV revolution, previously overlooked low-income communities now harbor a huge investment opportunity at just $500.

The company’s concerns aren’t without cause. Amazon officials in China recently informed merchants that it would soon unveil a low-price storefront that will directly rival Temu. Besides, Temu faces intense competition from other big players with deep roots in China, such as fast-fashion leader Shein and TikTok’s rapidly expanding “Shop” marketplace.

In a call with analysts, PDD executives further warned of “significantly greater uncertainty” in its global business unit, which includes Temu. They added, “Our operations have also become increasingly affected by non-business factors. Meanwhile, the competition we face is growing stronger. Competition is here to stay and is expected to intensify in our industry.”

These comments were interpreted as particularly grim by analysts, as well. “These put together will inevitably lead to fluctuations in our business,” said one executive, “As reflected in this quarter’s results, high revenue growth cannot be maintained, and a downtrend in profitability is unavoidable.”

See Also:

• Groundbreaking trading app with a ‘Buy-Now-Pay-Later' feature for stocks tackles the $644 billion margin lending market – here’s how to get equity in it with just $100

Despite this, PDD remains committed to investing in what it describes as high-quality merchants. Lei Chen, CEO of PDD, announced plans to invest heavily in supporting better-quality sellers. “On the supply side, we will invest substantial resources to support high-quality merchants willing to innovate and improve qualities,” Chen said. “And we will offer significant transaction fee reduction to these merchants, with an initial target of 10 billion in the first year.”

Temu’s criticism has mounted over more than rock-bottom prices and quirky in-app deals. There are also growing concerns over the company’s shipping methods, the safety of its products and the use of forced labor to make some of its products. 

More recently, U.S. lawmakers have proposed legislation making it more expensive for foreign companies like Temu to ship goods from China to the U.S. Under current rules, most Temu orders skirt import taxes and customs checks because they fall under a trade rule known as de minimis, which exempts packages valued under $800 from these costs.

Read More:

• General Motors and other leaders revealed to be investing in this revolutionary lithium start-up — allowing easy entry by launching at just $9.50/share with a $1,000 minimum.