Should You Buy, Hold, or Sell PDD Holdings Stock Before Q1 Earnings?

PDD Holdings PDD is slated to report first-quarter 2025 results on May 27.

For the first quarter, the Zacks Consensus Estimate for revenues is pegged at $14.17 billion, indicating growth of 17.82% from the year-ago quarter’s reported figure.

The consensus mark for earnings is pinned at $2.49 per share, suggesting a 12.01% decline from the prior-year quarter’s reported number.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

PDD has an impressive earnings surprise history. In the last reported quarter, the company delivered an earnings surprise of 7.81%. Its earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, while missing once, the average surprise being 22.35%.

PDD Holdings Inc. Sponsored ADR Price and EPS Surprise

PDD Holdings Inc. Sponsored ADR price-eps-surprise | PDD Holdings Inc. Sponsored ADR Quote

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for PDD Holdings this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

PDD has an Earnings ESP of 0.00% and carries a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Factors Shaping Q1 Results

PDD Holdings approaches its first-quarter 2025 earnings report with investors closely monitoring the company's ability to navigate ongoing strategic transitions while managing competitive pressures. The e-commerce giant's fourth-quarter 2024 results revealed a notable deceleration in revenue growth to 24% year over year, down from the robust 59% full-year growth rate, signaling potential headwinds that likely persisted into the first quarter of 2025.

The company's aggressive investment in its "high-quality development strategy" has intensified during recent quarters, with management implementing substantial ecosystem investments, including the 10 billion RMB fee reduction program and comprehensive merchant support initiatives. 

These strategic moves, while positioning PDD for long-term sustainable growth, have created near-term pressure on profitability margins and revenue acceleration. The impact of these investments is likely to have continued, affecting first-quarter performance, as management previously indicated expectations for fluctuations in both revenue growth and profit margins during this transition period.

Competitive dynamics in China's e-commerce landscape have intensified significantly, with management acknowledging fierce competition as a persistent challenge. This environment has compelled PDD to increase marketing expenditures and promotional activities to maintain market positioning against behemoths like Amazon AMZN, eBay EBAY and Alibaba BABA, factors that probably influenced first-quarter results. The company's sales and marketing expenses represented 28% of revenues in fourth-quarter 2024, and similar elevated spending levels are likely to have continued into first-quarter 2025.

PDD's global business segment faces additional complexities, with management citing accelerating changes in external environments and potential macro policy shifts. These international headwinds, combined with ongoing compliance investments and localization efforts, might have contributed to mixed performance in the company's overseas operations during the first quarter.

Given the combined impact of strategic investments, competitive intensity, and external uncertainties, PDD's first-quarter results are likely to reflect continued revenue growth moderation alongside margin fluctuations. While the company's long-term positioning appears solid through its ecosystem development approach, near-term performance volatility suggests investors may benefit from maintaining current positions or waiting for more attractive entry points.

Price Performance & Stock Valuation

PDD shares have increased 22.9% in the year-to-date period, outperforming the industry’s growth of 0.5% and the S&P 500 index’s decline of 1.8%.

Year-to-date Price Performance

Now, let us look at the value that PDD Holdings offers to its investors at current levels.

Currently, PDD is trading at a discount with a forward 12-month P/E of 9.46X compared with the industry’s 22.79X, reflecting a good investment opportunity.

PDD’s P/E F12M Ratio Depicts Discounted Valuation

Investment Thesis

PDD Holdings presents a compelling risk-reward proposition trading at discounted valuations amid strategic transformation challenges. While the company faces intensifying competition in China's e-commerce market and revenue growth deceleration, management's substantial ecosystem investments through fee reductions and merchant support programs position PDD for sustainable long-term competitive advantages. The ongoing transition creates near-term volatility in margins and growth rates, but the company's focus on high-quality development and supply chain innovation may eventually differentiate it from competitors. The discounted valuation offers potential upside for patient investors, though competitive pressures and investment phase uncertainties suggest careful timing remains crucial for optimal entry points.

Conclusion

PDD Holdings' strategic transition creates near-term uncertainty despite attractive valuations and long-term potential. Current shareholders should maintain positions given ecosystem investments and competitive moat development, while prospective investors may benefit from waiting for clearer execution evidence or further compression. The upcoming first-quarter 2025 results will provide critical insights into management's ability to balance growth investments with profitability.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research