3. PDD Holdings Inc. (NASDAQ:PDD)
Hedge Funds Holding Stakes: 86
Stock Upside Potential: 66.94%
PDD Holdings Inc. (NASDAQ:PDD) is a Chinese internet giant that owns and operates a portfolio of businesses. Its e-commerce platform offers products in various categories, including apparel, shoes, bags, agricultural produce, and childcare products.
PDD Holdings Inc. (NASDAQ:PDD) is one of the best Chinese stocks to buy, as the company is making solid strides in e-commerce through its Temu and Pinduoduo brands. The company’s expansion and achievements have turned PDD into a significant player in the online retail sector, competing with top brands such as Alibaba and JD. Crucially, this significant increase in market presence has also resulted in robust financial results.
PDD Holdings Inc. (NASDAQ:PDD) is growing its profits at a rate that outpaces nearly every publicly listed online retail firm. Investors on Wall Street anticipate this swift expansion to persist, projecting earnings per share (EPS) growth of approximately 97% in the upcoming quarter and 85% for the entire year 2024.
The expected growth should be fuelled by Temu, the online marketplace currently available in China and the US. The company has delivered better-than-expected earnings per share over the past four quarters, underlying growth in the core business.
PDD Holdings Inc. (NASDAQ:PDD) is holding an average price target of $218.36 on Wall Street, implying a 66.94% upside potential. Likewise, 86 hedge funds out of 920 tracked by Insider Monkey held stakes in the company as of the end of Q2 2024. As of June 30, GQG Partners is the top investor in the company and has a stake worth $1.44 billion.
Here is what Baron Emerging Markets Fund said about PDD Holdings Inc. (NASDAQ:PDD) in its fourth quarter 2023 investor letter:
“We added to our digitization theme by building a position in PDD Holdings Inc. (NASDAQ:PDD), a leading Chinese e-commerce platform. Founded in 2015, the company has emerged as China’s second largest e-commerce player, capturing approximately 20% market share. In our view, PDD’s competitive moat lies in its team purchase model that facilitates bulk buying through direct partnerships with manufacturers, thereby eliminating intermediaries (e.g., distributors and middlemen) and lowering costs. Key factors driving the company’s meteoric growth include rising consumer demand for affordable products in China amid an economic slowdown, small-scale merchants seeking alternatives to Alibaba, and superior management execution. PDD’s revenue growth outpaces gross merchandize value growth owing to rising take rates as merchants aggressively compete for consumer traffic on the platform. In our view, PDD should continue to gain market share given its dominance in the value-for-money segment, growing affordable branded product offerings, and high operational efficiency. We believe the company’s growth will be further supported by the recent launch of its international e-commerce platform, Temu, which has become one of the fastest growing apps globally. Leveraging China’s excess manufacturing capacity, Temu has strong negotiating power with domestic suppliers and attracts global consumers with competitively priced products. Temu’s recent initiatives to improve unit economics, coupled with achieving variable breakeven in the sizable U.S. market, showcase management’s skill and commitment to sustained growth. We expect PDD to at least double its earnings and free cash flow in the next three years, with the potential for continued compounding thereafter.”
