Stock Market

Pinduoduo Stock Buyers Better Hope Temu Is Not Another Wish.com

You might not be very familiar with PDD (NASDAQ:PDD), but this is the holding company that owns China-based e-commerce platform Pinduoduo. However, there’s more to the story. After considering PDD’s other well-known e-commerce venture, you’ll probably want to minimize your exposure to Pinduoduo stock.

I’m not saying that you shouldn’t invest in PDD or Pinduoduo at all. The important thing is to understand the substantial risks involved. As we’ll discover, one of PDD’s businesses has the potential to be a blockbuster success or, quite possibly, a dismal failure.

Thinking About Dip-Buying Pinduoduo Stock? Be Careful!

You may have noticed that Pinduoduo stock jumped to $150 early this year before sliding to the $120 area. Is this an invitation to a prime dip-buying opportunity? Not necessarily.

Sure, PDD has done well with its Pinduoduo e-commerce platform, which the company operates in China. Pinduoduo might be loosely compared to Amazon (NASDAQ:AMZN) in the U.S., though Pinduoduo isn’t a massive juggernaut like Amazon is.

Here’s what you need to consider before investing in PDD based on Pinduoduo’s success. PDD also operates the Temu e-commerce platform internationally. Temu is like the Wish.com online-shopping portal. Some people might even debate whether Temu is little more than a re-branded Wish.com.

What’s so bad about being similar to Wish.com, though? ContextLogic (NASDAQ:WISH) owns Wish.com, and ContextLogic stock was once a red-hot topic of conversation among meme-stock traders. Surely, a comparison to Wish.com indicates Temu will be a blockbuster success – right?

It’s Risky to Be on Team Temu

Before you join Temu’s team, I strongly suggest that you first look at what happened to ContextLogic stock. From top to bottom, it has lost the vast majority of its value.

Apparently, being a meme crowd favorite didn’t solve Wish.com’s problems. According to CNBC, Wish.com “was valued at $14 billion at the time of its IPO in 2020″ but is now “being acquired by Singapore’s Qoo10 for $173 million in cash, 99% below its peak price.”

Evidently, the market for ultracheap items might not be as robust as some folks assumed it would be. As Temu spends heavily on advertising, including pricey Super Bowl ads, skeptical investors should wonder whether Temu will follow down the same unfortunate path that Wish.com did.

Bear in mind, Temu reportedly spent an estimated $600 million to $1.4 billion on advertisements during 2023’s first nine months. Thus, PDD is taking a big risk on Temu’s success, and so are you, if you’re a shareholder.

Pinduoduo Stock: It’s Not Just a Bet on Pinduoduo

I would encourage you to research both Pinduoduo and Temu, since PDD operates both of those e-commerce businesses. Then, you might have mixed feelings about PDD.

In addition, consider what happened to Wish.com and ContextLogic stock. If you’re still enthused about buying Pinduoduo stock, be sure to keep your position size very small. That way, you can mitigate your risk against a potential share-price collapse.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.

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