According to BofA Securities' research report, PDD (PDD.US)      surprised the market with both of its 1Q25 revenue and earnings falling short of expectations.

The company's transaction revenue growth slowed from 33% in the previous quarter to 6% YoY, and what was even worse was that its non-GAAP net profit sank by 45% YoY, which the broker attributed to reduced domestic high-margin revenue, ongoing losses from Temu, and a slight increase in subsidies for home appliances and electronics.

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Despite anticipation that the adverse impact from the trade-in subsidy policy and pressure from Temu's losses will gradually dissipate over the coming quarters, BofA Securities pointed out that PDD has pledged to reinvest over the next three years to support platform ecosystem development and merchants. Accordingly, the broker revised downward its 2025-26 revenue forecasts for the company by 4-6% and non-GAAP net profit forecasts by 20-25%.

BofA Securities lowered its target price for PDD from USD140 to USD120, while reiterating the Neutral rating.
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