Great read as always. I think investors have been too used to PDD's high margins, and are slow to accept that PDD will have structurally lower margins compared to what they achieved in 1Q/2Q24 when they were overearning by squeezing merchants.
Although I can understand the panic given that their margins are now lower than TTG's for the first time in eight quarters - as such, very difficult to have a view on the steady state profitability of the company. As you mentioned, investing in PDD requires trust in management that they will continue to be shrewd capital allocators, as they have proven in the past
Thanks! What I said earlier about revenue also applies to margins: depending on which operating model Temu is using at any given time, the margin profile will swing dramatically.
That disappearing investment income is likely due to mark-to-market losses of their us T bill holdings
T bill prices actually went up in Q1 2025 due to interest rate decline, so how did they incur M2M losses?
This deserves a spot on The Great Wall Street’s Wall of Fame. Excellent job. Cheers!
Thanks
Great read as always. I think investors have been too used to PDD's high margins, and are slow to accept that PDD will have structurally lower margins compared to what they achieved in 1Q/2Q24 when they were overearning by squeezing merchants.
Although I can understand the panic given that their margins are now lower than TTG's for the first time in eight quarters - as such, very difficult to have a view on the steady state profitability of the company. As you mentioned, investing in PDD requires trust in management that they will continue to be shrewd capital allocators, as they have proven in the past
Thanks! What I said earlier about revenue also applies to margins: depending on which operating model Temu is using at any given time, the margin profile will swing dramatically.
"people hate outliers" but in this case your thoughts are one of the best outilier I've ever read, thank you and keep it up 🙏🏻
Thanks!
Wait what? Where did the cash go?
I asked them - but I guess they will not reply.