Pinduoduo stock shoots up after profit more than triples, as consumer sentiment recovers

Shares of Pinduoduo Inc.
PDD,
-3.78%
shot up 7.4% in premarket trading Monday, after the China-based company that connects agricultural producers with consumers reported second-quarter profit that more than tripled and revenue that rose well above expectations, citing “a recovery in consumer sentiment.” Net income grew to RMB8.90 billion ($1.33 billion), or earnings of RMB6.22 per American depositary share (ADS), from RMB2.41 billion, or RMB1.69 per ADS, in the year-ago period. Excluding nonrecurring items, adjusted net income was RMB10.78 billion. The FactSet consensus for earnings per ADS was RMB2.96. Revenue climbed 36.4% to RMB31.44 billion ($4.69 billion), beating the FactSet consensus of RMB23.93 billion. Revenue from online marketing services jumped 39% to RMB25.17 billion and revenue from transaction services soared 107% to RMB6.22 billion, while revenue from merchandise sales dropped 97% to RMB50.7 million. Cost of revenue rose just 0.8%, to boost gross margin to 74.7% from 65.7%. “We saw a recovery in consumer sentiment in the second quarter especially during the 618 shopping festival, a reflection of the resilience of overall consumption,” said Chief Executive Lei Chen. The stock has rallied 19.2% over the past three months through Friday, while the iShares MSCI China ETF
MCHI,
-0.81%
has ticked up 0.3% and the S&P 500
SPX,
-3.37%
has slipped 2.4%.