Chinese e-commerce companies are quickly gaining traction globally. Shein, the Boohoo competitor, is preparing to go public in a $80 billion deal. Temu, on the other hand, has become one of the fastest-growing companies in the world. Temu’s popularity could benefit PDD Holdings, its parent company.
Temu users and traffic are soaringTemu is the fastest-growing e-commerce company in the world. Data compiled by Google shows that interest in the company has surged to a record high today. It also points to more growth in the coming months.
This interest has also led to more user growth. Data compiled by SEMRush shows that the website was visited 341 million times in September. This was an increase from 233 million in July and 267 million in August.
Most of this traffic is coming from the United States, Germany, the UK, and Mexico. Notably, the average visit duration in Temu stands at 13.13 minutes, which is higher than Amazon’s 12.59.
These numbers mean that the company is growing rapidly. It has done that by spending billions of dollars in marketing. I am sure that most people have seen its digital advertisements. Many popular YouTubers and TikTok users have also promoted it by showing their Temu purchases.
Most importantly, Temu is known for its huge product availability and low prices. Analysts believe that the company is able to make money selling cheap products by working directly with manufacturers who benefit from its wide reach.
Watch here: https://www.youtube.com/embed/quGoGgbP-aE?feature=oembedPDD stock could benefitThe main company that will benefit from Temu’s popularity is PDD Holdings, formerly known as Pinduoduo. PDD, the parent company of Temu, is a major e-commerce company in China. It has a combined market cap of over $145 billion.
PDD started Temu as a way of replicating its success in China in a global space. It hopes to make Temu as successful as Pinduoduo is in its home market. This explains why Temu is able to spend billions of dollars in marketing.
The most recent results showed that the company’s revenue jumped by 66% YoY to over RMB 52,280 million ($7.2 billion). Its operating profit jumped to more than RMB 12.7 billion ($1.5 billion). As a result, its total profit was over $1.8 billion.
While Temu is growing at a fast pace, its contribution to PDD Holdings was quite minimal. Indeed, its huge marketing was quite negative for the company’s profitability. In a statement, Jun Liu, the company’s CEO said:
“Temu is currently in a learning stage. Our key focus right now is how we can apply our expertise to create our unique value. We do not focus on my position or other financial metrics at the current stage?”
However, in the future, Temu will be an important part of PDD Holdings. It is also a good hedge against inflation since it sells most of its products are quite cheap.
All this explains why PDD stock is doing well. It has risen by over 29% this year and by over 468% in the past five years. And despite this, the shares are still quite undervalued. It is trading at forward PE multiple of 22, which is lower than other fast-growing companies.
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