Chinese e-commerce platform Pinduoduo's shares plummeted on Thursday after the company missed third quarter 2019 forecasts. Investors have raised concerns about the firm's losses for the year.
According to Investor's Business Daily, Wall Street forecasted adjusted losses of eight cents on total Q3 revenue of $1.06 billion. However, the company adjusted loss at 20 cents per share with revenue hiking to $1.05 billion.
Despite surging revenue, the numbers still fall short of analyst expectations, with the Pinduoduo stock making a head-dive of 22.9 percent and closing only at 31.40 on Thursday's trading.
Despite the bad news on the online retail company's shares, the company reported a massive increase of active users on the platform. During the third quarter, the number of active users increased by 85 percent to 430 million.
Chief executive Zheng Huang said during the Q3 2019 earnings report that Pinduoduo focused on investing "in our users." He said efforts to provide consumer needs were stepped up throughout the company's anniversary sale.
The company has yet to overtake Chinese tech giant Alibaba and challenge JD.com directly, but with its current stock losses, some industry experts are unsure whether the platform will ever make it up the ladder to go toe-to-toe with China's leading e-commerce networks.
The pessimism among investors came largely due to the fact that Pinduoduo posted solid growth during the second quarter. Many investors placed their bets on the company's ability to explore possibilities amid competition.
However, competition from Alibaba, JD.com, and other startups appears to be hitting the Shanghai-based online retail company in many ways. These rivals are stepping up efforts in attracting lower-tier markets, industry experts pointed out.
The company explained that exclusivity from competitors had a "material impact" on the company's revenue and Q3 losses as some sellers are being pressured to stick with a single platform where they can sell products.
In Pinduoduo, over 10,000 small and micro sellers had to choose which platform they will market their products in. Over 1,000 brand flagship stores were also impacted by this exclusivity move from rival e-commerce networks.
Reuters noted that the online retail platform's hiking expenses also played a role in the quarter's disappointing miss. Operating expenses hit 8.47 billion yuan, an amount that more than doubled from the previous quarter.
Some investors are still betting on Pinduoduo's growing active user base to hopefully pull up the figures by the last quarter of 2019. As of September-end, the company had a total of 536.3 million active users.
Industry experts are also expecting a rebound should competitors heed to China's market regulator's call for the stoppage of forced exclusivity among merchants.
