How Temu, a shopping app targeting US consumers, helped latecomer PDD catch up with Alibaba in market value

Temu, a Chinese-owned shopping app launched in the US last September, has become a key factor driving strong revenue growth for its parent PDD Holdings, briefly vaulting the company’s market value above that of Alibaba Group Holding in the US stock market.

The exceptional popularity of Temu, which offers cut-to-the-bone pricing so consumers can “shop like a billionaire”, contributed to a 94 per cent surge in revenues for PDD Holdings and a strong stock price rally, prompting Alibaba founder Jack Ma, who is no longer involved in day-to-day operations, to congratulate the “decisions, execution and efforts” of his rival on an internal website. Alibaba owns the South China Morning Post.

Temu, along with other China-backed apps such as Shein and TikTok Shop, are emerging as super shopping tools connecting overseas consumers with China’s vast manufacturing machine. PDD chairman and co-CEO Lei Chen said during the Tuesday earnings call that Temu “has made meaningful progress since its launch a year ago”.

While PDD did not break out Temu in its quarterly financial results or provide any specific business information about the app, analysts are revising their valuations of PDD because of Temu’s popularity.

Morningstar Equity Research nearly doubled its “fair value” estimate of PDD’s American Depositary Receipts (ADRs) to US$213 per share from a previous US$117 “due to incorporation of the overseas platform Temu”.

PDD’s market cap briefly overtook Alibaba’s, reaching US$192 billion in Nasdaq on Wednesday morning (US time), while Alibaba fell below US$190 billion.

Temu gained fame with a TV ad that ran during the Super Bowl in February, and the app has expanded to over 40 markets, including Australia, New Zealand, UK, Germany, France, Spain, Mexico, Japan, South Korea and the Philippines.

Temu is wooing Chinese merchants by saying it will offer a “one stop service”, where the platform takes care of pricing, marketing and consumer services while the manufacturers just have to ship their goods to designated warehouses in China. In turn, Temu boasts in a brochure that it can sell more than 10 million items every day to overseas buyers, giving examples like a US$11.98 waterproof smartwatch and US$26.9 hiking boots.