PDD's Q1 results next week may be next catalyst: Morgan Stanley

Investing.com -- PDD Holdings’ upcoming first-quarter earnings report could serve as the next significant driver for its share price, according to Morgan Stanley analysts.

The company is set to release its financial results on May 27, and Morgan Stanley sees potential upside depending on the strength of its online marketing services (OMS) revenue and profitability.

“We believe its 1Q25 OMS revenue growth and non-GAAP net profit could be the next share price catalyst,” the analysts wrote in a note.

Morgan Stanley expects OMS revenue to rise 11% year over year, implying 18% growth in gross merchandise volume (GMV), and non-GAAP net profit to reach 28 billion yuan.

The firm sees PDD continuing to gain domestic market share, forecasting GMV growth that outpaces the broader industry’s 6% expansion.

However, they note that OMS revenue is likely to grow at a slower rate than GMV, as the company increases subsidies to merchants, resulting in a lower take rate.

Morgan Stanley outlines three potential scenarios for the quarter. Its base case, which it assigns a 60% probability, is for OMS revenue growth of 11–14% and profit of 27–28 billion yuan—likely driving a modest 0–5% share price increase.

They explain that a more bullish outcome, with stronger revenue growth and profit of up to 30 billion yuan, could lift shares 5–15%. Conversely, weaker numbers could send the stock down more than 10%.

Despite a high year-ago earnings base and greater subsidies to merchants and consumers, Morgan Stanley believes some of the pressure could be “partially offset by less spending in Temu US.”

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