3. PDD Holdings Inc. (NASDAQ:PDD)
Forward PE as of June 24: 11.6
Number of Hedge Fund Holders: 76
PDD Holdings Inc. (NASDAQ:PDD) is a global commerce group with a diverse portfolio of businesses. Two of its main ventures are Pinduoduo and Temu. Pinduoduo is an e-commerce platform that offers a number of products, including agricultural produce, apparel, shoes, bags, food and beverages, electronic appliances, and furniture along with many other products. Temu is an online marketplace that offers heavily discounted consumer goods.
PDD Holdings Inc. is making significant investments to enhance its global business. The company is improving supply chain efficiency by rolling out tailored fulfillment solutions in different markets and welcoming quality merchants worldwide. It is also investing in legal and compliance capabilities to create a safe and trustworthy shopping environment and conducting forward-looking research into laws and regulations in its operating markets.
Additionally, PDD Holdings Inc. (NASDAQ:PDD) is investing in technology and operations to improve overall user experience, which allows it to cater to the diverse needs and quality standards of global users. These investments are expected to bring more value to consumers and merchants, which will increase the platform’s recognition and acceptance in local communities.
PDD is one of the best undervalued stocks to buy as analysts expect a year-over-year EPS growth of 84%. The company is trading at a forward price-to-earnings ratio of 11.6x, nearly at a 25% discount to its sector median, and Wall Street analysts imply a 43% upside to PDD stock at current levels on June 24.
As of March 31, 76 hedge funds had stakes worth $5.8 billion in PDD Holdings Inc. (NASDAQ:PDD). Hillhouse Capital Management is the company’s largest shareholder with 11.8 million shares worth $1.37 billion.
Baron Emerging Markets Fund stated the following regarding 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.”
