PDD
📈 PDD Holdings showcases impressive growth, with recent revenue increases driven significantly by the massive adoption of its Temu platform in the US and Europe.
💰 The company maintains remarkably high gross margins (over 57%), surpassing competitors like JD.com, highlighting its efficient business model even with Temu’s discount pricing.
⚖️ Despite regulatory and geopolitical risks associated with Chinese stocks and Temu’s sustainability, PDD trades at an attractive forward P/E ratio (around 9x), suggesting a potential undervaluation given its growth trajectory.
@bernardodegarcia:
“Ladies and gentlemen, the time has come. We have to talk about Pinduoduo. It’s a story that, for many investors, is going unnoticed, but for me, it’s increasingly becoming, every time I read more, one of the most interesting opportunities in the Chinese market, which is formally PDD Holdings. Maybe you’ve already heard of them, although lately, it’s not what’s most talked about unless you’re referring to Temu, that app that is gaining popularity at full speed among Western buyers looking for cheap products directly from China. At first glance, one might think, ‘Another Alibaba clone, just another online store, period.’ But Pinduoduo’s numbers are truly impressive. What if I told you this company achieved a gross margin of over 57%? 57% gross margin! It’s the highest among the biggest names in China. Would you believe it? Plus, it’s trading cheaper and continues to grow revenues at double digits, like the 59% we’re seeing. Thanks to the massive adoption of TEMU in the United States and Europe, this company seems set to continue growing. One of the most important risks, obviously, would be all these tariffs, etc. But even with these risks, it’s trading at a future P/E of about nine times, meaning an earnings yield close to 13%. Its yield is 13.80%. Not even Alibaba or JD.com present such an attractive balance sheet at current prices and margins. Part of the reason for investor caution is the risk of government intervention and geopolitical escalations, like potential Trump tariffs on TEMU. However, for a long-term investor confident in China’s global economic importance, Pinduoduo looks very, very interesting. What if this company, with its Temu discount store and high profitability, becomes the fastest-growing e-commerce platform in the West? Pinduoduo reported 24% year-over-year growth, beating earnings expectations, though slightly missing sales projections. Still, 24% growth in such a competitive market is significant, outpacing JD.com and a moderating Alibaba. Temu is a resounding success, appealing to price-sensitive consumers with very cheap products, often free shipping, and aggressive promotions. This boosts sales and margins. Pinduoduo manages logistics and partnerships effectively, capturing gross margins over 50%, sometimes hitting 61%, far above JD.com’s ~15%. This signals a highly efficient model or very low platform costs. Looking ahead, Temu could expand further, potentially reaching a $40 billion GMV this year, growing over 33%. Each order adds to Pinduoduo’s margin and final profit. Since the stock trades at low multiples, I believe this creates a very attractive opportunity: fast growth (60% total revenue), high margins (61%), low price, and strong cash flow ($44 billion net cash). The biggest risk remains potential government intervention (both US and China) and trade tensions. Tariffs could hurt Temu’s price advantage. However, if things stabilize, Pinduoduo could sustain above-average growth. It’s gaining customers in China and conquering Western consumers. It could steal share not just from Alibaba and JD.com, but also Amazon, eBay, and Wish. Its rapidly growing free cash flow is impressive, multiplying significantly in recent years. If risks subside and the Chinese economy recovers, it could trade at a very low EV/Free Cash Flow multiple. The company generates cash faster than rivals, potentially allowing future share buybacks or dividends. Valuation-wise, a forward P/E of around 9 implies an earnings yield over 10%, the lowest multiple among peers despite the highest growth. The market seems wary, perhaps due to regulatory uncertainty or doubts about Temu’s longevity. I see this as a discount that could lead to a strong rally if growth prospects hold. Some analysts see fair value around $150-$160 per share, implying significant upside potential (40-50% growth projected for the next 12 months). In my view, Pinduoduo is the most solid bet in Chinese e-commerce right now, combining rapid growth, global expansion potential, the best gross margins, and the fastest revenue growth with high margins. While risks exist (Chinese policy, geopolitics, Temu’s sustainability), for long-term investors tolerant of volatility, it seems the most interesting option among Chinese tech giants. The risk seems well priced into the stock.”
Watch the exact part of the video where @bernardodegarcia talks about PDD Holdings here:
Watch the video on YouTube
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