20. PDD Holdings Inc. (NASDAQ:PDD)
No. of Billionaire Investors: 21
Total Value of Billionaire Holdings: $2.15 Billion
PDD Holdings Inc. (NASDAQ:PDD) is a Chinese multinational online commerce group and retailer that owns and operates a range of diverse businesses. The company operates famous e-commerce platforms including Pinduoduo and its fast-growing online marketplace Temu. The company’s strategic decision to expand Temu across global markets seems to be a great move. Temu has expanded its operations in more than 50 countries worldwide and is expected to be a key driver for the company’s growth moving forward.
PDD Holdings Inc. (NASDAQ:PDD) continues to build the user base, gain more sellers, and improve user engagement. This strategy creates a network effect that is expected to drive a growth cycle and value creation. In addition to that, PDD posted a 44% year-over-year revenue growth in Q4 2024, with revenue reaching RMB 99.4 billion. The good news for the company is that the U.S. President has reinstated De Minimis exemptions, which means smaller Temu orders remain outside the scope of tariffs.
Baron Funds, an investment management firm, released its Q3 2024 investor letter. Here is what the fund said:
“During the third quarter, we re-initiated a small investment in PDD Holdings Inc. (NASDAQ:PDD). We believe the company is truly unique in the global e-commerce landscape, with an innovative business model, and very strong growth prospects. Founded in 2015 as Pinduoduo, the company has grown into China’s second-largest e-commerce player, capturing over 20% market share. PDD’s Consumer-to-Manufacturer (C2M) model, which connects manufacturers directly to consumers, eliminated intermediaries, allowing for ultra-low prices that attract price-sensitive consumers and small merchants. Its discovery-based, algorithm-driven shopping experience has created a highly engaging platform, driving user and merchant growth in a virtuous cycle. We expect PDD to continue gaining share in China given its dominance in the value-for-money segment, growing branded product offerings at affordable prices, and high operational efficiency. PDD’s network effects and cost advantage, supported by its lean structure and efficient C2M model, are set to grow as it scales, both domestically and internationally. Its cross-border e-commerce platform, Temu, launched in September 2022, has rapidly become one of the world’s fastest-growing apps. Leveraging China’s excess capacity and PDD’s supply-chain efficiency, Temu wields strong pricing power over Chinese suppliers and attracts overseas consumers with competitively priced products. While still in the early stage, Temu has achieved 2% of the global ex-China e-commerce market and a variable break even in the U.S. market, underscoring PDD’s focus on sustainable growth. Despite its rapid growth and profitability, PDD trades at a double-digit free cash flow yield (despite losses from the early-stage international expansion through Temu), significantly below sector peers. While concerns over geopolitical tensions exist, we believe PDD’s growing competitive edge, strong cash flow, and disciplined management position it to create substantial long-term value for shareholders.”