Morgan Stanley values PDD's $66 billion cash pile at 30 cents on the dollar
Morgan Stanley cut the Temu owner to Equalweight with a $90 target on November 9 and discounted its net cash by 70%. Europe's parcel fees are why the haircut is roughly right: Temu must spend the pile rebuilding inside the EU before shareholders see a cent.
Vincent Jiangthree-minute read
Morgan Stanley's+0.48% — Morgan Stanley, up 0.48 percent today downgrade of PDD Holdings−1.49% — PDD Holdings, down 1.49 percent today on November 9 carried a number nobody had put on the record: the bank now values the company's net cash at 30 cents on the dollar 12. Analyst Eddy Wang cut the stock to Equalweight from Overweight and took his target to $90 from $129 12. His stated reason: investors have "limited visibility on when or how much will be returned" 1.
The pile is 56 cents of every dollar
PDD ended the second quarter with RMB456.4 billion of cash and short-term investments, about $66 billion more cash than debt, roughly 56% of its market value 3. The shares closed at $83 on November 6, down 39% over a year, and opened near $80.50 on Tuesday 34. PDD pays no dividend 3. Wang's stated risk is that the cash "continues to accumulate or gets reinvested without improving shareholder returns" 1. Where it gets reinvested is not a mystery.
Europe is spending the pile first
Since July 1, every low-value parcel entering the EU carries a €3 duty, and since November 1 a €2 handling fee sits on top of all packages regardless of value (The Inference previewed it here) 56. Small-parcel imports fell 60% between July and September, according to the European Commission 5. The damage shows in share: Temu has dropped to tenth among Denmark's most-used online stores, out of the top three for the first time since spring 2024 6, and German industry group bevh measured Asian platforms' third-quarter turnover down 35% 6.
Temu's answer is to stop being a parcel business: more than 80% of European turnover through locally registered sellers and EU warehouses 6. A local retailer needs inventory and warehouses, and both come off the same balance sheet.
Sales rise, profit falls
The filings tell the story of a balance sheet feeding an operation: revenue has risen year over year for ten straight quarters, and net income has fallen in five of the past six 7.
Revenue up ten straight quarters, net income down in five of the last six
Sales keep growing; profit stopped following in 2025
- Revenue
- Net income
Data
| Revenue | Net income | |
|---|---|---|
| Q1 '24 | $12.02B | $3.88B |
| Q2 '24 | $13.37B | $4.41B |
| Q3 '24 | $14.16B | $3.56B |
| Q4 '24 | $15.16B | $3.76B |
| Q1 '25 | $13.18B | $2.03B |
| Q2 '25 | $14.52B | $4.29B |
| Q3 '25 | $15.21B | $4.12B |
| Q4 '25 | $17.71B | $3.29B |
| Q1 '26 | $15.41B | $1.82B |
| Q2 '26 | $16.54B | $4B |
In the second quarter, transaction services, the revenue line that tracks Temu, grew 13% to RMB54.7 billion while net income slipped 12% to RMB27.2 billion 3. The Street already leans cautious: ten of sixteen brokers rate PDD hold, the average target is $107.31, and JPMorgan ($95) and Arete ($93) sit just above Morgan Stanley's new floor 4. Deutsche Bank went the other way on October 29, lifting PDD to Buy 8.
Morgan Stanley's $90 PDD target is the lowest on the Street
The floor sits barely above the stock
Data
| Value | |
|---|---|
| Morgan Stanley | $90 |
| Arete | $93 |
| JPMorgan | $95 |
| Street average | $107.31 |
| Benchmark | $114 |
November 24 decides which target is honest
The counter-case deserves its due: a €3 duty barely registers on a basket of cheap goods, the €6 billion a year Brussels projects from parcel fees is a 2028 to 2034 budget estimate, not a bill, and the €200 million fine is under appeal even as the compliance plan runs 389. But those arguments cap the pain, they do not reverse the direction.
Results are due around November 24 3. If transaction services keeps compounding and no dividend or buyback appears, Morgan Stanley's $41 bear case is honest arithmetic; a return policy makes the $123 bull case live 1. Europe's parcel bill is a capital question, not a revenue question.
Get Economy by email, free
How AI moves rates, banks, payments and the wider economy. In our daily email, every weekday.
