We came across a bullish thesis on PDD Holdings Inc. (PDD) on Substack by Favona Hathaway. In this article, we will summarize the bulls’ thesis on PDD. PDD Holdings Inc. (PDD)’s share was trading at $124.16 as of Feb 14th. PDD’s trailing and forward P/E were 12.34 and 9.59 respectively according to Yahoo Finance.
A close-up of a customer using the company’s e-commerce platform whilst shopping online.
Founded in 2015 as Pinduoduo, PDD has become China’s second-largest e-commerce player, capturing over 20% of the market share with its Consumer-to-Manufacturer (C2M) model. This innovative model eliminates intermediaries by connecting manufacturers directly to consumers, allowing PDD to offer ultra-low prices that appeal to price-sensitive shoppers and small merchants. The company’s discovery-based, algorithm-driven shopping platform has created a highly engaging experience, driving a cycle of growth in both users and merchants. PDD’s dominance in the value-for-money segment, its expanding branded product offerings at affordable prices, and its operational efficiency provide a strong foundation for continued market share gains, both within China and internationally. The company’s cross-border e-commerce platform, Temu, launched in 2022, has quickly become one of the fastest-growing apps globally, leveraging PDD’s supply-chain efficiency and pricing power to attract international consumers.
PDD’s financial performance has been impressive, with compound annual growth rates (CAGR) of 53% in total revenues, 50% in gross profit, 140% in operating income, and 133% in net income since 2021. With virtually no debt and a strong return on invested capital (ROIC), PDD is a prime example of a highly efficient, rapidly growing company. Its market capitalization of $172.43 billion reflects its strong earnings growth potential. Analysts project that, assuming a conservative growth trajectory, PDD could reach a market cap of $248 billion by 2029, representing a 144% upside from its current value, or a CAGR of 19.2%. This makes PDD an attractive investment opportunity, as it is trading at a P/E ratio of 10.9x despite its high growth and financial strength.
PDD’s competitive advantage is built on its massive marketplace, high barriers to entry, and capital-efficient model. The company’s growing marketplace is powered by its direct connections between manufacturers and consumers, which allows for lower costs and a more seamless shopping experience. Additionally, PDD’s ability to aggregate consumer demand through group buying and eliminate middlemen strengthens its position in the market. Despite facing risks, such as a secretive corporate culture and potential geopolitical challenges, PDD’s strong financials and audited accounts make it a compelling choice for long-term investors. While there are concerns regarding China’s economic climate, PDD’s growth potential remains robust, positioning the company as a leader in global e-commerce.
PDD Holdings Inc. (PDD) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 78 hedge fund portfolios held PDD at the end of the third quarter which was 86 in the previous quarter. While we acknowledge the risk and potential of PDD as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. 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.
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Disclosure: None. This article was originally published at Insider Monkey.