Pinduoduo Inc. (NASDAQ: PDD) – Mispriced Opportunity?
The market is going down this week, should I invest now...?
- Andrei CN
- 3 min read
Pinduoduo Inc. (“Pinduoduo” or the “Company”) (NASDAQ: PDD)
Current Price: $92.01 (-0.80%)
Date: September 5, 9:52:46 AM EST
Is Pinduoduo a Great Investment Opportunity?
PDD stands out as a healthy company with stable historical growth and solid prospects, yet it’s selling at a discount. Diligent Yield forecasts a potential return of 7-18% over the next 25 days, with a price target of $98.5 - $108.5 by the end of September. This forecast depends on the overall market correction, but we expect PDD’s share price to grow at twice the rate of the aggregate market.
Key Factors
- Strong brand presence (especially its subsidiary, Temu)
- Heavy marketing investments in both Europe and the Americas
- A wiped-out $50 billion valuation due to short-term market overreaction
- Strong growth prospects, with a lower P/E ratio compared to competitor Alibaba (BABA)
Despite its 30% dip, Pinduoduo remains a fundamentally healthy company. Notably, earnings have exceeded expectations with a 10% EPS surprise vs. street estimates.
Financial Performance – Q2 2024
Here’s a quick snapshot of PDD’s latest unaudited financial results for Q2 2024 (as of June 30, 2024):
Total Revenue: RMB 97,059.5 million (US$113,355.8 million), up 86% year-over-year.
Operating Profit: RMB 32,564.5 million (US$4,481.0 million), up 156% from Q2 2023.
Net Income: RMB 32,009.4 million (US$4,404.6 million), up 144% from Q2 2023.
Source: PDD Holdings Q2 2024 Financial Results
Is Pinduoduo a Risky Investment?
Short answer: No.
Pinduoduo is a financially resilient company with stable growth since its IPO on NASDAQ. With low costs and a well-developed e-commerce infrastructure, the company is positioned for long-term success. Compared to Alibaba, PDD’s P/E ratio is notably lower, highlighting its value relative to the competition.
According to MarketBeat, PDD outperforms Alibaba on 11 of the 19 factors used to compare the two companies.
Forbes Recognition
PDD has also been featured on Forbes Global 2000 (2024):
- #210 Global 2000 (2024)
- #354 in Sales
- #94 in Profits
- #760 in Assets
- #62 in Market Value
- #93 World’s Best Employers (2023)
Conclusion
Pinduoduo is a healthy company that is significantly undervalued due to temporary market fears. The 30% drop is not justified by the company’s strong financials and brand strength. Based on our research at Diligent Yield, we expect the stock to offer a return of 7-18% over the next 25 days, with a potential price range of $98.5 - $108.5 by the end of September. The stock should perform twice as fast as the aggregate market in the near term.
Key Metrics
- Previous Close: $92.75
- Open: $92.18
- Day’s Range: $90.16 - $93.08
- Volume: 2,405,277
- 52-Week Range: $88.01 - $164.69
- Market Cap: $128.81B
- P/E Ratio (ttm): 10.02
- Forward P/E: 7.22
- Diluted EPS (ttm): 67.30
- Price-to-Sales Ratio (ttm): 2.71
- Price-to-Book Ratio (ttm): 3.67
- Enterprise Value to EBIT (ttm): 6.79
- Enterprise Value to EBITDA (ttm): 6.67