Is losing $50B in market value good? I guess selling cheap and counterfeit shit is not a long term growth business model.
https://fortune.com/2024/08/26/temu-pdd-stock-plunges-government-scrutiny-amazon-rivals/
China fast-fashion retailer Temu soared like a rocket for two years—in just a few hours, its parent company lost more than $50 billion in market value
The stock of PDD Holdings, parent company of the fast-growing Temu shopping app, sank more than 30% on Monday, losing more than $50 billion in market value, after the e-commerce giant posted disappointing revenue results and executives warned of rapid competition and nonbusiness challenges that may dampen growth and profits going forward.
The Nasdaq-listed company, which is technically headquartered in Ireland but employs most of its workers in China, runs the Chinese online shopping giant Pinduoduo as well as Temu, the discount shopping app that has taken the U.S. and other Western markets by storm since it launched in 2022. But Temu has also faced intense scrutiny by governments, including that of the U.S., over issues ranging from its use of import trade loopholes, to the quality and origins of the products its sellers hawk through its online stores. And those pressures seem to be affecting the company’s outlook.
PDD is still scaling incredibly quickly both in China and in other markets, with revenue growing 86% in the second quarter to more than $13.6 billion, but analysts had been expecting more than $14 billion in sales. On top of that revenue miss, PDD executives spooked investors by painting a cloudy picture of future quarters.
“Looking ahead, revenue growth will inevitably face pressure due to intensified competition and external challenges,” Jun Liu, PDD’s financial chief, said in a press release. “Profitability will also likely … be impacted as we continue to invest resolutely.”
Amazon officials in China recently told merchants there that the U.S. e-commerce giant would soon launch its own low-price storefront. Temu also competes with other e-commerce giants with deep China ties, including fast-fashion titan Shein and TikTok’s rapidly growing Shop marketplace.
Though PDD Holdings does not break out Temu’s financial results, executives warned on a call with analysts of “significantly greater uncertainty” in the company’s global business unit, which houses Temu.
“Our operations [have] also become increasingly affected by nonbusiness factors,” said co-CEO Lei Chen. “And meanwhile, the competition we face is growing stronger. Competition is here to stay and is expected to intensify in our industry.
“These factors combined will inevitably cause fluctuations to our business,” Chen added. “As shown in this quarter’s results, high revenue growth is not sustainable, and a downward trend in profitability inevitable.”