1) PDD Holdings Inc. (NASDAQ:PDD)
Expected Earnings Growth: 85.2%
Number of Hedge Fund Holders: 86
Forward P/E Multiple (As of September 30): 9.64x
PDD Holdings Inc. (NASDAQ:PDD), formerly known as Pinduoduo Inc., is a multinational commerce group that owns and operates a portfolio of businesses. It continues to focus on the digital economy so that local communities and small businesses can benefit from higher productivity and new opportunities.
Market experts opine that PDD Holdings Inc. (NASDAQ:PDD)’s wide economic moat lies in the team purchase model, enabling bulk buying with the help of direct partnerships with manufacturers. This eliminates intermediaries (such as distributors and middlemen) and helps in reducing costs. The company’s long-term growth should be backed by higher consumer demand for affordable products in China, small-scale merchants who continue to seek alternatives to Alibaba and healthy management execution. PDD Holdings Inc. (NASDAQ:PDD)’s dominance in the value-for-money segment and high operational efficiency should help it gain market share.
The company continues to focus on supply chain improvements and merchant support and plans to increase investments. It has been actively exploring opportunities in the global market while, at the same time, it is prioritizing compliance and core strengths. Next, PDD Holdings Inc. (NASDAQ:PDD) is focusing on the agriculture sector and is also promoting the adoption of high-quality agricultural products. The company’s long-term investments are being targeted at fostering high-quality development and expanding the benefits of the digital economy.
In Q2 2024, PDD Holdings Inc. (NASDAQ:PDD) saw its revenues coming at RMB97,059.5 million (US$13,355.8 million), reflecting a rise of 86% from RMB52,280.7 million in the same quarter of 2023. This growth was due to an increase in revenues from online marketing services and transaction services. As per Wall Street, the shares of PDD Holdings Inc. (NASDAQ:PDD) have an average price target of $159.91.
As per Insider Monkey’s Q2 2024 data, 86 hedge funds reported owning stakes in PDD Holdings Inc. (NASDAQ:PDD). Hayden Capital, an investment management firm, released its second-quarter 2024 investment letter. Here is what the fund said:
“PDD Holdings Inc. (NASDAQ:PDD): A few weeks ago, Latepost (a leading Chinese technology news outlet) confirmed Pinduoduo’s online grocery initiative is solidly profitable (LINK). According to the article, Duoduo Grocery is able to achieve ~5% net profit margins in competitive markets (where they go up against Meituan Select). In non-competitive markets, they can achieve ~10 – 15% net margins.
The company doesn’t disclose the exact scale of Duoduo Grocery, but our calculations indicate it’s likely around ~RMB 300BN this year, and still growing in the double-digits. At that level, the division is likely contributing ~US $2.5BN in annual profits.
It’s an impressive result, but admittedly, not a huge needle-mover in light of the total $17.6BN net profits the company is expected to make this year (~14% of overall profits)…” (Click here to read the full text)
While we acknowledge the potential of PDD as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued 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.
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