1. PDD Holdings Inc. (NASDAQ:PDD)
Forward P/E: 10.66
Number of Hedge Fund Holders: 85
PDD Holdings Inc. (NASDAQ:PDD) is a Chinese multinational online commerce group and retailer that owns and operates a range of diverse businesses. It also has a strong logistics, sourcing, and fulfillment capabilities network that supports its operations. The company owns Pinduoduo, a popular online commerce platform in China, and also runs the fast-growing e-commerce marketplace Temu. Temu now operates in more than 50 countries worldwide.
Analysts are bullish on PDD Holdings Inc. (NASDAQ:PDD) and expect it to grow at a compound annual growth rate of 38% to 2026, driven by market share gains in China. Its continued expansion into international markets through the Temu platform is anticipated to accelerate and support this growth. Temu connects Chinese sellers and overseas buyers, allowing PDD Holdings Inc. (NASDAQ:PDD) to diversify its revenue base. It also holds a competitive advantage due to its group-buying model from small and medium businesses, which helps its listings to be cheaper than its competitors.
PDD Holdings Inc. (NASDAQ:PDD) is also focused on a high-quality development strategy and has been actively optimizing its platform ecosystem to deliver impactful results over the long run. This strategy has helped the company report impressive financial results. Its total revenues for fiscal Q3 2024 came up to around $14.157 billion, reflecting a 44% increase from the same quarter in 2023. Operating profit in the quarter also grew by 46% compared to the same quarter last year. The company is also moving a significant amount of its fulfillment operations to US-based facilities for Temu, which is expected to cut delivery time and shipping costs.
GreenWood Investors stated the following regarding PDD Holdings Inc. (NASDAQ:PDD) in its Q4 2024 investor letter:
“Aside from transitory foreign exchange translation losses (as opposed to trading losses), the two other notable detractors from our portfolio were MEI Pharma and PDD Holdings Inc. (NASDAQ:PDD) in 2024.
PDD Holdings founder Colin Huang is who inspired us to “run 3x faster,” as the relentless corporate culture of PDD has built an e-commerce company with roughly the same GMV (gross merchandise value) of Amazon in one-third the time it took Amazon to build itself. Shares reacted negatively when the company decided to reinvest its record margins into even faster growth and creating a healthier supplier ecosystem. As it looks set to create a second Amazon with its international site Temu, we are highly attracted to the opportunity. Sales are growing 4x faster than Amazon’s, yet shares are priced at less than a quarter of the Amazon earnings multiple.
PDD is a perfect example of why we want to look outside of the “Big Ten” companies that are nearly a third of global market indices. We would not want to compete with the demanding corporate culture of PDD and Temu. Its operating model is relentless at identifying efficiency throughout the manufacturing and selling supply chain. Not only is it a more formidable competitor than Amazon, and growing much faster, but the valuation is 4x more attractive than Amazon’s…” (Click here to read the full text)
Overall, PDD ranks first among the 10 cheap internet stocks to buy according to hedge funds. While we acknowledge the potential of internet stocks, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than PDD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
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