Goldman Sachs: Temu enters the "monetization" phase, Pinduoduo's new growth turning point has arrived!

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As Temu approaches its profitability inflection point and domestic revenue growth reaccelerates, Pinduoduo has entered the starting point of a new growth phase.

According to Chasewind Trading Desk, Goldman Sachs released its Q4 2025 earnings review report for Pinduoduo Holdings (PDD), maintaining a Buy rating and a 12-month price target of $158. Goldman Sachs forecasts the group’s adjusted net profit for Q1 2026 to be RMB 26 billion, up 55% year-over-year; and full-year adjusted net profit to be RMB 119 billion, up 11% year-over-year.

Goldman Sachs lists Pinduoduo as one of its core large-cap picks for China Internet in 2026. The company currently trades at about 9x 2026 expected P/E, significantly lower than the Goldman China Internet coverage median of 16x; by the end of 2025, net cash of roughly $70 billion, accounting for about 50% of recent market cap, while the current market cap has given almost no valuation to the Temu business.

Pinduoduo’s share price has fallen about 23% over the past 12 months, underperforming the NASDAQ Composite Index by more than 37 percentage points. Goldman Sachs believes that, at current prices, the company combines multiple catalysts including revenue acceleration, Temu's profitability inflection, AI application potential, and strong advertising technology capabilities, offering a highly favorable risk-reward ratio.

Temu’s Business Model Transformation Nears Completion, Profitability Expected by 2027

On Temu’s business model, Goldman Sachs’ research report indicates that Temu has almost completed the shift to a “local-to-local” delivery model in developed markets such as the U.S. and Europe, significantly enhancing business resilience. Goldman estimates Temu’s global GMV in 2026 will exceed $100 billion, laying the foundation for entering the profit realization stage.

Goldman forecasts Temu’s EBIT to move from a projected loss of RMB 7.7 billion in 2026 to a projected profit of RMB 3.2 billion in 2027, reaching a profitability inflection point. In terms of data, Temu’s global monthly active users (MAU) reached 516 million in February 2026, covering regions like the U.S., Europe, and Asia.

The strong performance in transaction service revenue also supports these expectations. In Q4, such revenue grew 19% year-on-year, accelerating from 10% in Q3 and exceeding expectations, mainly benefiting from the temporary easing of tariff policies and recovery of U.S. business, as well as continued growth of “Duoduo Grocery” after Meituan Optimal's scale contraction.

Goldman expects transaction commission revenue growth rates of +19% and +20% for Q1 and full-year 2026, respectively.

“Xin Pin Mu” Implements RMB 100 Billion Investment Over Three Years, Deepening Supply Chain Moat

Pinduoduo recently announced the establishment of “Xin Pin Mu,” with an initial scale of RMB 15 billion and plans to invest a total of RMB 100 billion over the next three years. Its aim is to incubate self-run global brands, upgrade Chinese manufacturing toward higher value-added production, and deepen the shared supply chain infrastructure between Pinduoduo and Temu.

According to Goldman, this strategic deployment will strengthen the company’s overall differentiation advantage and competitive barriers, helping it outperform peers over the long term. Notably, management has reiterated for the sixth consecutive quarter its commitment to reinvest more in the near term, and has indicated quarterly profits will see fluctuations.

Against this backdrop, Goldman slightly lowers its 2026 domestic core business profit forecast by 1% to RMB 114 billion, with the main domestic platform’s valuation multiple reduced from 12x to 10x, but the target price remains unchanged due to increased net cash. Goldman expects group EBIT in Q1 and full-year 2026 to be RMB 25 billion and RMB 115 billion, respectively.

Additionally, the company launched the “Free Delivery to Villages” initiative in Q4, building its own last-mile logistics infrastructure and covering village-level transportation costs, further deepening its penetration in lower-tier markets.

Ample Net Cash and Outstanding Valuation Appeal

By the end of 2025, Pinduoduo holds about $70 billion in net cash (about $60 billion after deducting restricted funds), equivalent to roughly 50% of the company’s market capitalization, providing ample ammunition for continued strategic reinvestment.

From a valuation perspective, Pinduoduo currently trades at about 9x 2026 expected P/E, compared to Goldman’s China Internet coverage median of 16x, representing a substantial discount. The current market capitalization includes almost no premium for Temu’s valuation.

Goldman calculates a 12-month price target of $158 using sum-of-the-parts (SOTP) analysis and believes that as Temu’s profitability inflection point approaches, AI application potential is unlocked, and strong advertising technology (Pinduoduo is a pioneer in ROI-oriented marketing tools) synergizes with China’s cost-competitive supply chain, the company’s valuation could see a substantial re-rating.

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The above content is from Chasewind Trading Desk.

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