What happened

Shares of Chinese e-commerce upstart Pinduoduo (PDD 1.96%) plunged 16.6% in September, according to data from S&P Global Market Intelligence. There wasn't a whole lot of news on Pinduoduo during the month, as the company reported earnings toward the end of August.

Still, after having more than doubled in 2020 amid the COVID e-commerce boom, shares cooled along with the rest of the technology sector last month.

A delivery man drops off a package and a customer signs for it on a smartphone.

Image source: Getty Images.

So what

Pinduoduo had reported second-quarter earnings at the end of August, posting 67% revenue growth and 79% gross merchandise volume (GMV) growth. As terrific as those numbers were, the company's revenue slightly missed analyst expectations.

In the days following the report, analysts at UBS and CLSA both downgraded the stock from "buy" to "neutral," citing the deceleration in revenue limiting the stock's upside after its impressive 2020 run. The negative momentum continued into September, as many investors sold high-flying technology stocks to make room for a record-setting number of  initial public offerings hitting the market during the month.

Now what

Pinduoduo's stock may churn a bit here for a while, as even after its September decline it's still up 73.2% on the year. While China has recovered rather well from COVID-19 compared with the rest of the world, the global economy is still under the shadow of the lingering pandemic.

And while e-commerce names are grabbing a larger share of the economic pie, Pinduoduo still makes most of its revenue from advertising sold on its platform -- notice, its revenue growth lagged GMV growth. Thus, even a high-quality e-commerce company like Pinduoduo isn't totally immune from discretionary spending constraints as the world tries to dig its way out of recession.