1. PDD Holdings Inc. (NASDAQ:PDD)
Year-over-Year Revenue Growth in FQ3 2023: 94%
Year-over-Year Revenue Growth in FQ4 2023: 123%
Year-over-Year Revenue Growth in FQ1 2024: 131%
Number of Hedge Fund Holders: 76
PDD Holdings Inc. (NASDAQ:PDD), previously known as Pinduoduo Inc., is an owner and operator of various businesses, including an e-commerce platform known as Pinduoduo and an online marketplace called Temu.
On May 22, PDD Holdings Inc. (NASDAQ:PDD) announced first-quarter earnings. The non-GAAP EPS was $2.83, which beat the estimates by $1.40. The revenue grew by 131% year-over-year to $12.02 billion and topped the estimates by $1.44 billion.
On its earnings day, PDD Holdings Inc. (NASDAQ:PDD) reported substantial net cash generated from operating activities, amounting to RMB 21.1 billion in the first quarter of 2024, compared to RMB 1.3 billion in the same period last year. As of March 31, it holds RMB 242.1 billion in cash, cash equivalents, and short-term investments, providing ample liquidity to support future growth initiatives, R&D investments, and strategic acquisitions.
Wall Street analysts are quite bullish on PDD Holdings Inc. (NASDAQ:PDD) as all 14 analysts that have covered the stock in the last three months maintain a buy-equivalent rating on it. The stock’s average price target of $217.75 represents a 42.2% upside to its share price, as of May 30. Over the last twelve months, PDD Holdings Inc.’s (NASDAQ:PDD) stock has gained nearly 120% yet has a relatively cheap valuation as it is trading at a trailing twelve-month PE ratio of 19.8 as of May 30 as compared to the internet retail industry’s average of 37.74x.
In Q1, hedge fund sentiment was positive toward PDD Holdings Inc. (NASDAQ:PDD) as 76 funds had stakes in the stock, compared to 71 funds in the prior quarter. Hillhouse Capital Management is the biggest shareholder in the company with a position worth $1.37 billion, as of March 31.
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.”
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