A Growth Stock with Chinese Roots: Pinduoduo
Pinduoduo is a China-based social e-commerce platform that uses true customers' feedback and real pictures of distributed products. Many people call it a hybrid version, which integrates some features of Amazon, Facebook, eBay and Pinterest at the same time, mostly fighting for the part of the audience that enters online from a smartphone or a tablet. Two different prices that are usually indicated in Pinduoduo's product card shows the standard price for one piece of a product added by lower price for joint, or even "viral" purchase, so that a potential buyer could create a group to purchase particular products together on discounted prices or join an already existing group, while the application only fixes the minimum number of each group's participants. PDD Holdings has been traded at the Nasdaq stock exchange since summer 2018 to represent Pinduoduo on Wall Street. Its shares already climbed by more than 75% year-to-date, including a jump from $101 to nearly $147.5 last month, boosted by blockbuster third-quarter earnings on November 28. PDD announced the Q3 revenue of 68.84 billion in Chinese Yuan, which was an equivalent of $9.435 billion at the moment, an increase of 94% from 35.5 billion in Chinese Yuan in Q3 of 2022, while the company's operating profit added 60% YoY to reach 16.7 billion in Yuan. This exceeded consensus expectations by almost 25% for the sales line and about 30% for the profit line. PDD’s market cap soared above $190 billion to eclipse the value of its well-known rival Alibaba, as the latter is still crippled by claims of governmental regulators.
Meanwhile, Pinduoduo is enjoying a lucky year. Its co-CEO Chen Lei commented his company clearly felt the recovery of the Chinese economy. Another pillar of its strength was Temu, a cross-border e-commerce platform to conquer America and the other world. Launched in autumn 2022, Temu successfully adopted a fully managed Chinese model, when both transaction and marketing revenues maintained synchronized growth in early stages, while later the introduction of extra revenue sources provided an accelerated growth of transaction revenues. Unlike other companies with Chinese roots that chose Southeast Asia as their primary destination, Temu targeted the North American market right from the very beginning trying to compete even with giants including Amazon. It is using content-based promotion on public platforms and affiliate marketing to attract customers, getting more space to cut its costs by reducing traditional marketing expenses.
Pinduoduo stock is facing an investing boom unlike other Chinese marketplaces like Alibaba and JD.com. It may contain further upside potential, given that the February 2021 peaking price at $212.6 per share is still 48% higher than the current market price of PDD.
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