Summary of the Conference Call Transcript Company and Industry - **Company**: Pinduoduo (PDD) - **Industry**: Internet and E-commerce Key Points and Arguments 1. **Stock Performance**: Pinduoduo's stock price has remained flat year-to-date, performing in line with the benchmark Chinese internet index, both up by 22% [1][3] 2. **Earnings Visibility**: The upcoming Q4 2024 earnings report, scheduled for March 20, is expected to significantly influence stock performance over the next two months, followed by the Q1 2025 report in May [1][3] 3. **Profit Margin Trends**: Investors are particularly focused on the sequential trends in profit margins, which have declined significantly due to management's decision to reduce monetization from merchants. The adjusted operating profit margin fell by 9 percentage points to 27% in Q3 2024 [3][4] 4. **Expectations for Q4 2024**: - The adjusted net profit margin is expected to decline slightly, with forecasts suggesting a drop of 1.3 to 3 percentage points. A more significant decline (over 5 percentage points) could negatively impact 2025 earnings forecasts [3][4] - Revenue growth is anticipated to slow down, with transaction service revenue growth expected to decrease from 72% in Q3 2024 due to high comparison bases and reduced merchant monetization [3][4] 5. **Online Marketing Services Revenue**: Channel surveys indicate that Pinduoduo's domestic GMV growth in Q4 2024 is expected to exceed 20%, leading to a reasonable year-on-year growth range of 20%-24% for online marketing services revenue [3][4] 6. **Revenue Forecasts**: J.P. Morgan predicts a 33% year-on-year revenue growth for Q4 2024, slightly above market consensus, with online marketing and transaction service revenues expected to grow by 20% and 49%, respectively [3][4] 7. **Investment Rating**: Due to low visibility in financials for the upcoming quarters, Pinduoduo is rated as "Neutral" [5][6] 8. **Valuation**: The target price is set at $105, based on a 10x multiple of annualized earnings for Q3 2024, reflecting the company's long-term competitiveness and short-term visibility issues [6] 9. **Risks to Rating and Target Price**: - Downside risks include greater-than-expected profit declines due to increased investments, high tariffs on Chinese products affecting Temu's growth, and a potential slowdown in Chinese consumer growth [7] - Upside risks include a rebound in profits despite management's investment plans and favorable government policies [7] Other Important but Possibly Overlooked Content - **Limited Disclosure**: The lack of detailed investment plans from management contributes to low short-term financial visibility, impacting the investment rationale for the next six months [5] - **Analyst Disclosures**: The report includes disclaimers regarding potential conflicts of interest due to J.P. Morgan's business relationships with Pinduoduo [2][11]