Investing.com -- PDD Holdings Inc DRC (NASDAQ:PDD) dropped 3.2% in Monday trading after Morgan Stanley stepped to the sidelines on the Chinese e-commerce operator, citing mounting uncertainty over capital allocation. Analyst Eddy Wang downgraded the stock to Equalweight from Overweight and reduced the firm's base-case price target to $90 from $129, pointing to an absence of clarity around shareholder returns.
While the company maintains a substantial balance sheet, Wang emphasized that "investors have limited visibility on when or how much will be returned." That dynamic prompted the bank to apply a 70% discount to PDD's net cash holdings, warning that "the key risk is that cash continues to accumulate or gets reinvested without improving shareholder returns."
Against that backdrop, the broker trimmed its long-term earnings projections, cutting 2028, 2029, and 2030 estimates by 3%, 4%, and 6%, respectively. Maintaining a 14% weighted average cost of capital and a 3% terminal growth rate within its discounted cash flow model, Morgan Stanley adjusted its bear-case target to $41 from $59 and its bull-case valuation to $123 from $176.
The revised $90 target implies a multiple of 9 times projected 2027 non-GAAP earnings, which Wang views as fair given broader deceleration across China's retail landscape. Even so, the valuation preserves a premium over peer JD.com, supported by PDD's superior projected gross merchandise volume growth of 5.4% annually through 2030, compared with JD's estimated 1.7% pace.
Original Article
PDD drops as Morgan Stanley cuts to Equalweight on capital return risks
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