Goldman Sachs: Temu enters the "monetization" phase, and a new growth inflection point for Pinduoduo has arrived!

As the profitability inflection point for Temu approaches and domestic revenue growth accelerates again, Pinduoduo has reached the starting point of a new growth phase.

According to the Chasing Wind Trading Desk, Goldman Sachs has released a performance review report for Pinduoduo Holdings (PDD) for the fourth quarter of 2025, maintaining a buy rating with a 12-month target price of $158 unchanged. Goldman Sachs predicts that the group’s adjusted net profit for the first quarter of 2026 will be 26 billion yuan, a year-on-year increase of 55%; the adjusted net profit for the entire year is expected to be 119 billion yuan, a year-on-year increase of 11%.

Goldman Sachs lists Pinduoduo as one of its core large-cap picks in the Chinese internet sector for 2026. The company is currently trading at an expected price-to-earnings ratio of about 9 times for 2026, significantly lower than the median of 16 times for Goldman Sachs’ coverage of Chinese internet stocks; as of the end of 2025, net cash is approximately $70 billion, about 50% of the recent market value, while the current market value gives almost no valuation to the Temu business.

Pinduoduo’s stock 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 the current price level, the company benefits from multiple catalytic factors including revenue acceleration, the profitability inflection point for Temu, the potential for artificial intelligence applications, and strong advertising technology capabilities, making the risk-reward ratio highly favorable.

The transformation of Temu’s business model is nearing completion, with the profitability inflection point expected to be realized in 2027

In terms of Temu’s business model, according to Goldman Sachs’ research report, the platform has largely completed the transition to a “local-to-local” delivery model in developed markets such as the United States and Europe, significantly enhancing its business resilience. Goldman Sachs estimates that Temu’s global GMV will exceed $100 billion in 2026, laying the foundation for entering the monetization phase.

Goldman Sachs predicts that Temu’s EBIT will turn from an estimated loss of 7.7 billion yuan in 2026 to an estimated profit of 3.2 billion yuan in 2027, marking the profitability inflection point. In terms of data, Temu’s global monthly active users (MAU) reached 516 million in February 2026, covering multiple regions including the United States, Europe, and Asia.

The strong performance of transaction service revenue also supports the above expectations. In the fourth quarter, this revenue grew by 19% year-on-year, further accelerating from 10% in the third quarter and exceeding expectations, primarily benefiting from a temporary easing of tariff policies that led to a recovery in U.S. business, as well as the continued growth of “Duo Duo Buy Vegetables” following a contraction in Meituan’s preferred scale.

Goldman Sachs expects that the growth rates of transaction commission revenue for the first quarter and the entire year of 2026 will be +19% and +20%, respectively.

“New Pin Mu” will invest 100 billion yuan over three years, deepening the supply chain moat

Pinduoduo recently announced the establishment of “New Pin Mu” (Xin Pin Mu), with an initial scale of 15 billion yuan, planning to invest a total of 100 billion yuan over the next three years, aimed at incubating self-operated global brands and promoting the upgrade of Chinese manufacturing to high value-added production, while deepening the shared supply chain infrastructure between Pinduoduo and Temu.

According to Goldman Sachs’ analysis, this strategic deployment will strengthen the company’s overall differentiation advantages and competitive barriers, helping it to continue outperforming its peers in the long term. It is noteworthy that management has reiterated for the sixth consecutive quarter that it will increase reinvestment in the early stages and has indicated that quarterly profits will fluctuate.

In this context, Goldman Sachs slightly lowered its 2026 domestic core business profit forecast by 1% to 114 billion yuan, while the valuation multiple for the domestic main platform was reduced from 12 times to 10 times, but the target price remains unchanged due to the increase in net cash. Goldman Sachs expects the group’s EBIT for the first quarter and the entire year of 2026 to be 25 billion yuan and 115 billion yuan, respectively.

In addition, the company also launched the “Free Village Delivery” program in the fourth quarter, building its own end logistics infrastructure and covering transportation costs at the village level, further strengthening its penetration depth in lower-tier markets.

Abundant net cash and significant valuation attractiveness

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

From a valuation perspective, Pinduoduo is currently trading at an expected price-to-earnings ratio of about 9 times for 2026, which represents a significant discount compared to the median of 16 times in Goldman Sachs’ coverage of Chinese internet stocks, while the current market value includes almost no valuation premium for Temu.

Goldman Sachs derives a 12-month target price of $158 using the sum-of-the-parts (SOTP) approach, believing that as the profit inflection point for Temu approaches, the potential for AI applications is realized, and the synergy of strong advertising technology capabilities (Pinduoduo is a pioneer in ROI-oriented marketing tools) with China’s cost-competitive supply chain offers substantial revaluation potential for the company.