Why Pinduoduo Inc (NASDAQ: PDD) stock is crashing

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Pinduoduo Inc (NASDAQ: PDD) stock plunged 8.2% on 20th May, 2019 (as of 1:01 pm GMT-4; Source: Google finance) after the company in the first quarter of FY 19 has reported the Non-GAAP net loss attributable to ordinary shareholders of RMB1,379.1 million (US$205.5 million), compared with Non-GAAP net loss attributable to ordinary shareholders of RMB267.9 million in the same quarter of 2018. Non-GAAP basic and diluted net loss per ADS were RMB1.20 (US$0.20), compared with Non-GAAP basic and diluted net loss per ADS of RMB0.60 in the same quarter of 2018. Non-GAAP basic and diluted net loss per ADS were RMB1.20 (US$0.20), compared with Non-GAAP basic and diluted net loss per ADS of RMB0.60 in the same quarter of 2018. Net cash used in operating activities was RMB1,543.3 million (US$230.0 million), compared with RMB683.5 million in the same quarter of 2018, primarily due to an increase in operating expenses. Cash, cash equivalents and restricted cash were RMB37.2 billion (US$5.5 billion) as of March 31, 2019, compared with RMB30.5 billion as of December 31, 2018.

Why Pinduoduo Inc (NASDAQ: PDD) stock is crashing

Moreover, for the first quarter of 2019, the company has reported 228% growth in revenue to RMB4,545.2 million (US$677.3 million) from RMB1,384.6 million in the same quarter of 2018. The increase was primarily driven by an increase in revenues from online marketing services. Revenues from online marketing services rose 256% to RMB3,948.4 million (US$588.3 million) from RMB1,108.1 million in the same quarter of 2018. Revenues from transaction services rose 116% to RMB596.8 million (US$88.9 million) from RMB276.5 million in the same quarter of 2018. Total costs of revenues grew 174% to RMB873.3 million (US$130.1 million) from RMB318.7 million in the same quarter of 2018. The increase was mainly driven by higher costs for cloud services, call center and merchant support services, partially offset by a payment rebate of RMB339.2 million from Tencent.

Further, the company has posted the total operating expenses of RMB5,792.4 million (US$863.1 million), compared with RMB1,319.0 million in the same quarter of 2018.

Sales and marketing expenses rose 302% to RMB4,889.3 million (US$728.5 million), compared to the same quarter of 2018, mainly due to an increase in online and offline advertisement and promotions and branding campaigns. General and administrative expenses were RMB236.1 million (US$35.2 million), which is a substantial rise from RMB28.8 million in the same quarter of 2018, primarily due to an increase in headcount and share-based compensation expenses. Research and development expenses rose 816% to RMB667.1 million (US$99.4 million) compared to the same quarter of 2018.

 

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