Citigroup: Raises Pinduoduo's target price to $165, Upgrades rating to "Buy"

Citibank published a research report stating that the reduction in tariffs between China and the United States, as well as the speed at which a consensus has been reached, exceeded expectations. This is beneficial for Chinese cross-border sellers, and has a positive impact on the sales of Temu, an international e-commerce platform under Pinduoduo, in the United States. The bank believes that the impact of tariffs over 30% on Chinese merchants is manageable, with some tariffs potentially being passed on to American consumers, while some costs will be adjusted through advertising expenses and reduced production costs. Sellers will focus on selling higher quality products to obtain a higher average product price. The bank mentioned that many sellers have already prepared 3 to 5 months of inventory in the United States, so there may be a temporary mismatch between costs and selling prices, which could lead to higher-than-expected profits for Temu in the second quarter of this year. As the tariff burden has substantially decreased, the bank has upgraded Pinduoduo's rating from "neutral" to "buy", and raised the target price to $165.