FAST NEWS: Maturing Pinduoduo Posts Single-Digit Revenue, User Growth

The latest: E-commerce company Pinduoduo Inc. (PDD.US) said on Friday its revenue rose 7% year-on-year to 23.8 billion yuan ($3.6 billion) in the first quarter. The company, which specializes in sales to China’s smaller cities, reported a first-quarter profit of 2.6 billion yuan, compared with a 2.9 billion yuan loss a year earlier.

Looking Up: Excluding merchandise sales, which fell 99% during the quarter, the company’s revenue rose 39% in the first quarter to 23.7 billion yuan.

Take Note: The company’s average monthly active users (MAUs) rose just 4% year-on-year to 751.3 million during the quarter, representing the second consecutive quarter of low single-digit growth for that indicator. “At this current scale, it is inevitable for us to see slower growth,” said vice president of finance Liu Jun.

Digging Deeper: Pinduoduo rose to prominence in China’s ultra-competitive e-commerce sector by focusing on consumers in China’s smaller cities that were traditionally neglected by big names like Alibaba (BABA.US; 9988.HK) and JD.com (JD.US; 9618.HK). The company found success in the highly price-sensitive market by connecting manufacturers directly with buyers, cutting out typical middleman costs. But its success attracted competition from other e-commerce companies, including Alibaba. Pinduoduo turned profitable in the second quarter of last year, making the latest report its four consecutive profitable quarter.

Market Reaction: Pinduoduo shares rose 15.2% in Friday trade after the results came out. The stock is down about 14% this year, but has nearly doubled from an all-time low in mid-March.

Reporting by Doug Young

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