Pinduoduo share prices tumbled 17.5% on Wednesday after disclosing heavier-than-expected losses and skyrocketing operating expenses in the fourth quarter of 2018.
The social e-commerce company grew explosively in 2018, with full-year revenues surging 652% to RMB 13.1 billion ($1.9 billion) compared with the previous year. Gross Merchandise Volume (GMV) also grew 234% year-on-year to RMB 471.6 billion in 2018, driven by rapid user growth and average user spend doubling, said Huang Zheng, Pinduoduo founder and CEO.
However, 2018 operating losses soared more than eight-fold to RMB 3.96 billion in 2018 compared with RMB 469.2 million in 2017, more than half of which (RMB 2.1 billion) was recorded in the fourth quarter, a seasonal high point due to important shopping promotions. Chinese e-commerce companies usually burn more cash to boost sales and compete for users during the 11.11 shopping festival in November and year-end sales, vice president of finance Xu Tian stated during the earnings call.
The company reported earning losses of $0.24 per share for the fourth quarter, missing analyst estimates of $0.22. It did not offer guidance for the first quarter of 2019.
“It should develop its own living products like Muji rather than spending huge money on marketing events,” a netizen named Daniel Yue said on online trading platform, Fufu. Another investor who asked to be identified by his surname, Huang, commented that the company’s stock price was vulnerable to slowing growth, and expressed concerns about future performance.
Chinese e-commerce giants face increasing concern from global investors that an economic downturn will slow growth. Pinduoduo’s fourth quarter growth in monthly active users (MAU), while nearly doubling to 272 million, was marked deceleration from 495% year-on-year in the second quarter and 225% year-on-year in the third quarter of 2018. In late February, its rival JD.com said that it expected revenue growth would further slow after declining for two consecutive quarters.