Even though PDD Holdings(NASDAQ: PDD) had little proprietary news to report on Tuesday, its stock was affected by the latest analyst moves. Several pundits tracking the Chinese e-commerce incumbent cut their price targets a day after its latest earnings release -- with one even downgrading her recommendation -- leading to a sell-off by Mr. Market.
PDD's American depositary receipts (ADRs) ended the day more than 4% lower in price, contrasting unfavorably with the slight (0.2%) gain of the bellwether S&P 500 index.
Concerns about the company's second quarter and its future
Although PDD posted very strong growth in some of its second-quarter fundamentals, the company still fell short of the consensus analyst revenue estimate, although it beat on profitability. Management's pronouncement of potentially difficult times ahead also dampened investor sentiment.
These developments and other negatives concerned some analysts tracking the stock. Citigroup's Alicia Yap went so far as to downshift her recommendation one peg to neutral from the previous buy. Yap also made a significant cut to her PDD price target, which is now $120 per ADR where formerly it was $194.
For the analyst, PDD's future is rather opaque. She wrote in a new research note that "given limited investor communication and the lack of operating metrics and financial breakdown disclosure, together with management's intentional/proactive cautious outlook comment, the stock will likely be range bound until PDD is able to regain investor confidence through few quarters of consistent result beat."
Analysts with scissors
While other pundits refrained from downgrading their PDD recommendations, on Tuesday, a clutch of them cut their price targets. Among the cutters was Bank of America's Joyce Lu, who now feels the stock is fairly valued at $170 per ADR versus her previous $206 level. She's maintaining her buy recommendation on the company, however. Similarly, Goldman Sachs prognosticator Ronald Keung effected a cut from $184 per ADR to $165 while keeping his buy rating intact.
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Bank of America is an advertising partner of The Ascent, a Motley Fool company. Citigroup is an advertising partner of The Ascent, a Motley Fool company. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bank of America and Goldman Sachs Group. The Motley Fool has a disclosure policy.
