For Chinese stock and online retailing giant Pinduoduo (NYSE:PDD), its Temu brand has made quite a splash in the United States. But like many other operations, it’s starting to wonder if, perhaps, it’s time to branch out. Yet investors seem a bit hesitant at this notion, sending shares down fractionally in Tuesday afternoon’s trading.
Naturally, like many other such operations—especially those that work online anyway—Pinduoduo is questioning the wisdom of focusing on one market, even one as large as the United States. Moreover, recent political troubles between the United States and China have left Pinduoduo wondering if the basket holding all its eggs in this case might be in line for a fall anyway.
The U.S. makes up roughly 60% of Temu’s total merchandise sales, a disproportionate figure that makes Temu reconsider. In fact, it wants to drop that number back to just 30% by 2025, instead putting more focus on Europe, Japan, South Korea, and the Middle East.
A Sketchy Situation
While certainly, expanding a market is seldom a bad idea—it really only gets bad when you start splitting your focus too far to manage it effectively—Temu might have a tougher time branching out than some might hope. Reports suggest that Temu is facing trouble in France, as the French government recently penalized “fast fashion” products. A ban on advertising them may follow, hurting Temu and others in the field. Great Britain, meanwhile, might be next, and that’s a major portion of Europe preparing for resistance.
Is PDD A Good Stock to Buy?
Turning to Wall Street, analysts have a Strong Buy consensus rating on PDD stock based on eight Buys and one Hold assigned in the past three months, as indicated by the graphic below. After a 61.89% rally in its share price over the past year, the average PDD price target of $181.44 per share implies 42.27% upside potential.
