Expect significant new tariffs on Chinese imports and moderate levies on goods from other nations , as President-elect Donald Trump rolls out his protectionist agenda. However, with his preference for chaotic policymaking and sudden shifts , there’s uncertainty on how soon these import taxes will actually hit. Dubbed “ Tariff Man ,” Trump aims to use tariffs both strategically and tactically . He’s mentioned taxing all Chinese goods up to 60% and potentially setting 10%-20% tariffs on imports globally , but details on these plans remain vague . Key players within Trump’s team are divided: Robert Lighthizer , a staunch tariff advocate, sees permanent duties as crucial to balance US trade , while others, like billionaires John Paulson and Scott Bessent , view tariffs as temporary leverage. Trump’s previous administration had mixed feelings, especially on national security-related trade limits , which he sometimes dismissed, favoring an “open for business” approach. High-profile busin
PDD Holdings Inc, the parent company of the e-commerce platform Temu, saw its shares dive as much as 18% following a warning from the company that its rapid revenue growth is unsustainable. This decline comes as PDD faces mounting competition from rivals such as ByteDance’s TikTok and Alibaba Group Holding Ltd, which are also targeting budget-conscious consumers.
Key Points:
Revenue and Profitability Concerns: Co-founder Chen Lei emphasized that PDD’s current revenue growth trajectory is not sustainable and that a decline in profitability is inevitable. This warning led to a sharp decline in the company's stock during pre-market trading in New York.
Financial Performance: For the June quarter, PDD reported revenue of 97.1 billion yuan (approximately RM59.59 billion), missing the average analyst estimate of 100 billion yuan. However, the company’s net income was higher than expected at 32 billion yuan, compared to a projected 27.5 billion yuan.
Intense Competition: PDD has been aggressively expanding its e-commerce business Temu to bolster its global presence amid a struggling Chinese economy. However, the company faces fierce competition from established players like Alibaba and JD.com, as well as newer challengers like Kuaishou Technology. This has led to concerns that PDD will need to invest more in supporting merchants and maintaining its competitive edge.
Merchant Backlash and Regulatory Scrutiny: PDD has encountered challenges in China, including a merchant backlash in July when hundreds of vendors protested against what they perceived as unfair penalties imposed by the company. Additionally, Temu is facing increasing regulatory scrutiny, particularly in the European Union, where a proposal to close an import tax loophole for cheap online goods could impact Chinese retailers like Temu.
Global Expansion and Competitive Landscape: Despite these challenges, PDD’s global expansion through Temu has shown some success. Temu quickly became one of the most downloaded apps in the U.S. after its debut in 2022, competing with other giants like Shein and Amazon in certain segments. However, the company’s increased spending to tackle global competition is expected to put pressure on profitability, potentially leading to a downward revision of earnings estimates for the second half of the year and into 2025.
Outlook: Bloomberg Intelligence noted that PDD’s guidance on lower profitability, coupled with its first revenue miss in 10 quarters, could dampen the growth outlook for the next 12 months. The company’s need to invest more heavily in response to global competition suggests that margins may come under pressure, affecting future earnings.
PDD Holdings is facing a challenging environment as it balances the need for continued growth with the pressures of intense competition and regulatory scrutiny, both in China and abroad.
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