PDD Holdings (NASDAQ: PDD) stock price has moved into a correction zone as concerns about Temu’s growth rise. The shares have slipped by more than 14% from their highest point this year. This retreat gives the Chinese behemoth a market cap of over $169 billion.
Temu growth concernsPDD Holdings, the parent company spent heavily on the latest Super Bowl event. The firm spent millions airing six ads and offering $10 million worth of giveaways. This made it the biggest spender during the event as the company promoted Temu.
For starters, Temu is one of the fastest-growing companies in the e-commerce industry. Its growth has been helped by the company’s spending on advertising and the fact that it focuses on selling cheap products that are mostly sourced in China.
Behind PDD Holdings’ spending on Super Bowl was a hidden fact that Temu’s growth was slowing in the United States. Data shows that the company’s total sales crashed by 12.5% in December. That was a major surprise considering that the company was growing by 50% in mid-2023.
Most importantly, Americans are no longer shopping on Temu as they did before, according to a report by Morgan Stanley. Further data by SimilarWeb shows that Temu’s website visitors have not been growing in the past few months.
Wish.com similaritiesTherefore, there are concerns that Temu could end in the same situation that Wish.com is in. As my colleague wrote on Monday, Wish.com was sold on Monday for less than $200 million. This marked a major decline for a company that was valued at billions just a few months ago.
The risk for Temu is that its deceleration could continue in all countries where it does business. This would be in line with the performance of Wish.com, which had peak monthly users of over 100 million. The most recent results showed that the company’s monthly users had dropped to 11 million.
The other similarity is that Wish’s growth was powered by increased marketing spending. Most recently, the number of its users has dropped as the company slashed its advertising spending.
Temu has a rich father in that PDD Holdings has over $28 billion in cash and short-term investors. PDD is also highly profitable and has a good market share in Mainland China. However, in the long term, the company will need to slash its marketing spend on Temu as it focuses on profitability.
PDD Holdings stock price forecast
Turning to the daily chart, we see that the PDD share price peaked at $152.95 on January 11th. It has now pulled back and dropped by more than 14% from its highest point this year. The stock has remained between the 50-day and 100-day moving averages. The MACD indicator has moved below the neutral point.
Therefore, the outlook for the stock is bearish, with the next point to watch will be at $100, which is about 24% below the current level. More upside will be confirmed if the stock moves above the key resistance point at $152.95.
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