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Pinduoduo or Zacks Rank #1 (Strong Buy) stock PDD Holdings ((PDD - Free Report) ) is an Ireland-based Chinese e-commerce platform founded in 2015. Though PDD is much younger than its rivals like Alibaba Group ((BABA - Free Report) ) or VIP Shop Holdings ((VIPS - Free Report) ), PDD has gained significant popularity in a relatively short period, becoming one of the largest e-commerce companies in China.
Temu, A Heavily-Discounted Marketplace, Spurs Growth
Last quarter, PDD’s quarterly earnings grew 31% while revenue soared 89% year-over-year. In fact, for several quarters in a row, PDD has grown the top and bottom-line growth at a robust double-digit clip, far outpacing both its domestic and foreign industry group peers.
Image Source: Zacks Investment Research
The main driver of growth is PDD’s wildly popular online marketplace Temu. Temu is PDD’s discount e-commerce platform, which leverages Chinese vendors to sell and ship directly to customers in the destination country. Because Temu cuts out the intermediary and takes advantage of low-cost labor and product inputs from China, the website can undercut other e-commerce websites like Alibaba’s AliExpress or Amazon (AMZN - Free Report) .
Unique Features
PDD’s websites also offer unique features that are unavailable on other mainstream e-commerce websites, including:
Group Buying
· Users can form groups to purchase the same product together, allowing them to benefit from lower prices.
Interactive Features
· PDD incorporates gamification and social networking elements to engage users more than traditional websites.
Mobile-Centric
· Unlike other platforms, PDD is heavily focused on its mobile app, which is designed to be user-friendly and accessible.
Top and Bottom-Line Growth to Continue
Zacks Consensus Analyst Estimates predict that PDD’s rapid growth will continue well into 2024. Analysts anticipate double-digit earnings and revenue growth over the next few quarters.
Image Source: Zacks Investment Research
Impressive EPS Surprise History
It’s one thing to have high EPS expectations and a whole other thing to execute on those expectations. PDD has done the latter. Over the past 11 quarters, the discount e-commerce giant has surpassed expectations each quarter while handily beating expectations by 25% or more over the past three quarters.
Image Source: Zacks Investment Research
Power Earnings Gap: A Recipe for Higher Prices
After reporting earnings on November 28th, PDD shares launched higher by 18% on volume nearly three times the average. Such power and volume indicate that institutional investors are rushing to enter the stock. Further, because PDD has held its earnings gap and volume has dried up, it is a sign that investors with significant gains in the stock are unwilling to part with shares.
Image Source: TradingView
Finally, investors should not overlook PDD’s relative strength versus other Chinese stocks. While China’s economy and stock market have struggled, PDD has thrived. If China is to recover, PDD should see even more strength.
US/China Tensions Cooling?
According to the Wall Street Journal, the Biden administration is weighing a plan to reduce tariffs on Chinese consumer products. Meanwhile, China recently approved the first Boeing (BA - Free Report) 787 delivery since 2021. If tensions between the world’s two largest economies dissipate, it will be another bullish catalyst for PDD.
Bottom Line
PDD has emerged as a force to be reckoned with in the Chinese and international e-commerce landscape, outpacing competitors with its innovative platform, Temu. With a focus on heavily discounted offerings, unique features like group buying and interactive elements, and a mobile-centric approach, PDD continues to experience robust growth in earnings and revenue. Expect shares to be higher in the next six to twelve months.
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Bull of the Day: PDD Holdings (PDD)
Company Overview
Pinduoduo or Zacks Rank #1 (Strong Buy) stock PDD Holdings ((PDD - Free Report) ) is an Ireland-based Chinese e-commerce platform founded in 2015. Though PDD is much younger than its rivals like Alibaba Group ((BABA - Free Report) ) or VIP Shop Holdings ((VIPS - Free Report) ), PDD has gained significant popularity in a relatively short period, becoming one of the largest e-commerce companies in China.
Temu, A Heavily-Discounted Marketplace, Spurs Growth
Last quarter, PDD’s quarterly earnings grew 31% while revenue soared 89% year-over-year. In fact, for several quarters in a row, PDD has grown the top and bottom-line growth at a robust double-digit clip, far outpacing both its domestic and foreign industry group peers.
Image Source: Zacks Investment Research
The main driver of growth is PDD’s wildly popular online marketplace Temu. Temu is PDD’s discount e-commerce platform, which leverages Chinese vendors to sell and ship directly to customers in the destination country. Because Temu cuts out the intermediary and takes advantage of low-cost labor and product inputs from China, the website can undercut other e-commerce websites like Alibaba’s AliExpress or Amazon (AMZN - Free Report) .
Unique Features
PDD’s websites also offer unique features that are unavailable on other mainstream e-commerce websites, including:
Group Buying
· Users can form groups to purchase the same product together, allowing them to benefit from lower prices.
Interactive Features
· PDD incorporates gamification and social networking elements to engage users more than traditional websites.
Mobile-Centric
· Unlike other platforms, PDD is heavily focused on its mobile app, which is designed to be user-friendly and accessible.
Top and Bottom-Line Growth to Continue
Zacks Consensus Analyst Estimates predict that PDD’s rapid growth will continue well into 2024. Analysts anticipate double-digit earnings and revenue growth over the next few quarters.
Image Source: Zacks Investment Research
Impressive EPS Surprise History
It’s one thing to have high EPS expectations and a whole other thing to execute on those expectations. PDD has done the latter. Over the past 11 quarters, the discount e-commerce giant has surpassed expectations each quarter while handily beating expectations by 25% or more over the past three quarters.
Image Source: Zacks Investment Research
Power Earnings Gap: A Recipe for Higher Prices
After reporting earnings on November 28th, PDD shares launched higher by 18% on volume nearly three times the average. Such power and volume indicate that institutional investors are rushing to enter the stock. Further, because PDD has held its earnings gap and volume has dried up, it is a sign that investors with significant gains in the stock are unwilling to part with shares.
Image Source: TradingView
Finally, investors should not overlook PDD’s relative strength versus other Chinese stocks. While China’s economy and stock market have struggled, PDD has thrived. If China is to recover, PDD should see even more strength.
US/China Tensions Cooling?
According to the Wall Street Journal, the Biden administration is weighing a plan to reduce tariffs on Chinese consumer products. Meanwhile, China recently approved the first Boeing (BA - Free Report) 787 delivery since 2021. If tensions between the world’s two largest economies dissipate, it will be another bullish catalyst for PDD.
Bottom Line
PDD has emerged as a force to be reckoned with in the Chinese and international e-commerce landscape, outpacing competitors with its innovative platform, Temu. With a focus on heavily discounted offerings, unique features like group buying and interactive elements, and a mobile-centric approach, PDD continues to experience robust growth in earnings and revenue. Expect shares to be higher in the next six to twelve months.