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PDD Holdings (PDD) Gains 12.5% in 3 Months: Time to Buy?
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PDD Holdings’ (PDD - Free Report) investors have been enjoying some short-term gains from the stock of late. Its shares have rallied 12.5% in the past three months, outperforming the industry’s return of 4.2% and the S&P 500’s 7.7% growth.
PDD is riding on strength in its e-commerce business model, thanks to its robust Pinduoduo platform.
The company is also benefiting from a favorable environment in the consumer market, driven by an upward trend in consumption patterns. It is addressing well the rising online retail penetration on the back of its strong promotional activities and Pinduoduo.
PDD’s strong positioning in the agriculture field is another plus. It seizes the growing business opportunities in agriculture by leveraging its Pinduoduo platform, via which it promotes the digital inclusion of smallholder farmers.
Although the company operates in a highly competitive e-commerce market wherein behemoths like Amazon (AMZN - Free Report) , eBay (EBAY - Free Report) and Alibaba (BABA - Free Report) exist, its strong platform, growing merchant relationships and aggressive strategies are expected to help it strengthen its market position.
PDD Three Months Price Performance
Image Source: Zacks Investment Research
Solid Fundamentals Weigh in
Solid momentum in the Pinduoduo platform on the back of a wide range of product offerings, which include agricultural produce, apparel, shoes, mother and childcare products, food and beverage, electronic appliances, furniture, and household goods, is primarily driving PDD’s business growth.
In first-quarter 2024, total revenues were RMB 86.8 billion, which increased 131% year over year.
The company’s strengthening Temu platform, which is an innovative online marketplace capitalizing on online ads, social media, coupon codes and games to attract and retain users, is another positive.
PDD’s efforts to integrate online traffic with offline retail experiences are boosting traffic on its e-commerce platforms.
The company’s growing agriculture business, on the heels of strong partnerships with local communities, shops, farmers and agri-merchants, remains noteworthy. It is also supporting the new generation of farmers and merchants, who are skilled in both agriculture and e-commerce.
PDD Holdings’ strong liquidity position remains noteworthy. Cash and short-term investments were RMB 242.1 billion as of Mar 31, 2024, compared with RMB 217.2 billion as of Dec 31, 2023. The company had no long-term debt as of Mar 31, 2024.
Strong Strategies Boost Long-Term Prospects
Building on the strong demand and improving consumer sentiment the company is experiencing currently, it is actively engaging with merchants to broaden its product selection. It is strengthening its relationship with top brands from around the world to bring product launches to its platform.
PDD is making concerted efforts to drive innovation across its products and services through advanced technologies. It will spend RMB10 billion in 2024, its second straight year of investment at this scale, with an eye on technology enhancements and its core agricultural operations.
These investments are meant to boost the fundamental strength of PDD’s business by supporting high-quality consumption, broadening high-quality supply, and promoting a high-quality ecosystem.
The company’s continuous efforts to tailor fulfillment solutions in different markets in order to improve supply-chain efficiency and reduce costs are major positives.
PDD Holdings is also strengthening its legal and compliance capabilities by building an industry-leading compliance program. This investment is meant to create a safe and trustworthy shopping environment for its users.
Estimates Paint a Bright Picture
PDD’s strong e-commerce business, with a growing focus on agriculture produces, surely reflects solid top-line growth potential over the long run. Also, its increasing relationships with various merchants and technical advancements are expected to boost its overall performance.
The Zacks Consensus Estimate for 2024 revenues is pegged at $56.27 billion, indicating year-over-year growth of 62.4%.
The consensus mark for 2024 earnings stands at $12.32 per share, suggesting growth of 87.8% from the year-ago actual. The estimate has also been revised upward by 1.1% over the past 30 days.
Image Source: Zacks Investment Research
Our Final Take
There is no denying that PDD Holdings sits favorably in terms of core business strength, earnings prowess and solid opportunities. The Zacks Rank #1 (Strong Buy) stock’s deepening focus on long-term value creation presents a good reason for existing investors to retain shares for potential gains. You can see the complete list of today’s Zacks #1 Rank stocks here.
For those exploring to make additions to their portfolios, the valuation indicates expectations of superior performance than its industry peers.
PDD is currently trading at a discount with a forward 12-month P/E of 9.96X compared with the industry’s 14.8X and lower than the median of 14.01X. This shows a solid opportunity for the investors.
PDD's P/E F12M Graph
Image Source: Zacks Investment Research
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PDD Holdings (PDD) Gains 12.5% in 3 Months: Time to Buy?
PDD Holdings’ (PDD - Free Report) investors have been enjoying some short-term gains from the stock of late. Its shares have rallied 12.5% in the past three months, outperforming the industry’s return of 4.2% and the S&P 500’s 7.7% growth.
PDD is riding on strength in its e-commerce business model, thanks to its robust Pinduoduo platform.
The company is also benefiting from a favorable environment in the consumer market, driven by an upward trend in consumption patterns. It is addressing well the rising online retail penetration on the back of its strong promotional activities and Pinduoduo.
PDD’s strong positioning in the agriculture field is another plus. It seizes the growing business opportunities in agriculture by leveraging its Pinduoduo platform, via which it promotes the digital inclusion of smallholder farmers.
Although the company operates in a highly competitive e-commerce market wherein behemoths like Amazon (AMZN - Free Report) , eBay (EBAY - Free Report) and Alibaba (BABA - Free Report) exist, its strong platform, growing merchant relationships and aggressive strategies are expected to help it strengthen its market position.
PDD Three Months Price Performance
Image Source: Zacks Investment Research
Solid Fundamentals Weigh in
Solid momentum in the Pinduoduo platform on the back of a wide range of product offerings, which include agricultural produce, apparel, shoes, mother and childcare products, food and beverage, electronic appliances, furniture, and household goods, is primarily driving PDD’s business growth.
In first-quarter 2024, total revenues were RMB 86.8 billion, which increased 131% year over year.
The company’s strengthening Temu platform, which is an innovative online marketplace capitalizing on online ads, social media, coupon codes and games to attract and retain users, is another positive.
PDD’s efforts to integrate online traffic with offline retail experiences are boosting traffic on its e-commerce platforms.
The company’s growing agriculture business, on the heels of strong partnerships with local communities, shops, farmers and agri-merchants, remains noteworthy. It is also supporting the new generation of farmers and merchants, who are skilled in both agriculture and e-commerce.
PDD Holdings’ strong liquidity position remains noteworthy. Cash and short-term investments were RMB 242.1 billion as of Mar 31, 2024, compared with RMB 217.2 billion as of Dec 31, 2023. The company had no long-term debt as of Mar 31, 2024.
Strong Strategies Boost Long-Term Prospects
Building on the strong demand and improving consumer sentiment the company is experiencing currently, it is actively engaging with merchants to broaden its product selection. It is strengthening its relationship with top brands from around the world to bring product launches to its platform.
PDD is making concerted efforts to drive innovation across its products and services through advanced technologies. It will spend RMB10 billion in 2024, its second straight year of investment at this scale, with an eye on technology enhancements and its core agricultural operations.
These investments are meant to boost the fundamental strength of PDD’s business by supporting high-quality consumption, broadening high-quality supply, and promoting a high-quality ecosystem.
The company’s continuous efforts to tailor fulfillment solutions in different markets in order to improve supply-chain efficiency and reduce costs are major positives.
PDD Holdings is also strengthening its legal and compliance capabilities by building an industry-leading compliance program. This investment is meant to create a safe and trustworthy shopping environment for its users.
Estimates Paint a Bright Picture
PDD’s strong e-commerce business, with a growing focus on agriculture produces, surely reflects solid top-line growth potential over the long run. Also, its increasing relationships with various merchants and technical advancements are expected to boost its overall performance.
The Zacks Consensus Estimate for 2024 revenues is pegged at $56.27 billion, indicating year-over-year growth of 62.4%.
The consensus mark for 2024 earnings stands at $12.32 per share, suggesting growth of 87.8% from the year-ago actual. The estimate has also been revised upward by 1.1% over the past 30 days.
Image Source: Zacks Investment Research
Our Final Take
There is no denying that PDD Holdings sits favorably in terms of core business strength, earnings prowess and solid opportunities. The Zacks Rank #1 (Strong Buy) stock’s deepening focus on long-term value creation presents a good reason for existing investors to retain shares for potential gains. You can see the complete list of today’s Zacks #1 Rank stocks here.
For those exploring to make additions to their portfolios, the valuation indicates expectations of superior performance than its industry peers.
PDD is currently trading at a discount with a forward 12-month P/E of 9.96X compared with the industry’s 14.8X and lower than the median of 14.01X. This shows a solid opportunity for the investors.
PDD's P/E F12M Graph
Image Source: Zacks Investment Research