Group 1 - PDD Holdings Inc. Sponsored ADR's stock closed at $104.01, reflecting a +0.9% change, outperforming the S&P 500's gain of 0.53% [1] - The stock has increased by 3.37% over the past month, surpassing the Conglomerates sector's gain of 2.86% and the S&P 500's gain of 2.69% [1] Group 2 - The upcoming earnings disclosure is anticipated to show an EPS of $2.56, indicating a 6.67% growth year-over-year, with projected net sales of $15.68 billion, up 25.24% from the previous year [2] - Recent modifications to analyst estimates for PDD Holdings reflect short-term business trends, with positive revisions indicating analyst optimism about the company's profitability [3] Group 3 - The Zacks Rank system, which includes estimate changes, has a strong track record, with 1 stocks averaging an annual return of +25% since 1988; PDD currently holds a Zacks Rank of 3 (Hold) [5] - PDD Holdings has a Forward P/E ratio of 8.44, which is a discount compared to the industry average of 14.99 [6] Group 4 - The company has a PEG ratio of 0.25, significantly lower than the Diversified Operations industry's average PEG ratio of 1.84, indicating potential undervaluation [7] - The Diversified Operations industry, part of the Conglomerates sector, has a Zacks Industry Rank of 194, placing it in the bottom 23% of over 250 industries [7][8]

Investment Rating - Pinduoduo (PDD) is recommended for attention due to its strong domestic low-price advantage and rapid expansion in overseas business [3] Core Views - Pinduoduo has achieved rapid growth through its "white-label logic + extreme efficiency" strategy, leveraging social media and low-cost user acquisition [1][2] - The domestic e-commerce market is highly competitive, with limited growth potential due to high user penetration rates [2] - Temu, Pinduoduo's overseas platform, has become a key growth driver, leveraging China's supply chain advantages and a "semi-hosted" model to expand rapidly [3] Company Overview - Pinduoduo was founded in 2015, went public on NASDAQ in 2018, and became the largest e-commerce platform in mainland China by user count in 2021 [1] - From 2017 to 2023, Pinduoduo's active buyer CAGR was 37.3%, GMV CAGR was 103.9%, and revenue CAGR was 128% [1] - In 2023, Pinduoduo achieved a Non-GAAP net profit of 67.9 billion yuan, with a Non-GAAP net profit margin of 27.4% [1] Domestic Business - Domestic e-commerce growth has slowed due to high user penetration (over 80%) and intense competition [2] - Pinduoduo's "Billion Subsidy" program has helped it transition from serving "cost-effective users" to meeting "user cost-effective needs" [2] - The company's organizational efficiency is high, with per capita revenue reaching 14.23 million yuan in 2023, three times that of Alibaba and seven times that of JD.com [2] Overseas Expansion (Temu) - Temu was launched in September 2022 and has expanded to 89 countries/regions as of December 2024 [3] - Temu leverages China's supply chain advantages and a "semi-hosted" model to offer low prices internationally [3] - As of December 2023, Temu had 467 million independent users, ranking second globally in e-commerce [3] - Temu faces challenges such as tariff and regulatory risks, as well as the need to build overseas supply chain and fulfillment capabilities [3] Financial Performance - Pinduoduo's EPS for 2023A was 41.67 yuan/ADS, with projected EPS for 2024E, 2025E, and 2026E at 82.08, 93.93, and 113.2 yuan/ADS, respectively [5] - The company's PE ratio for 2023A was 18x, expected to decrease to 9x, 8x, and 6x for 2024E, 2025E, and 2026E, respectively [5] Competitive Landscape - Pinduoduo's domestic growth is challenged by intense competition, with platforms like Alibaba and JD.com also offering subsidies and merchant support [3] - Temu competes with other cross-border e-commerce platforms like AliExpress, SHEIN, and TikTok Shop, each with distinct advantages in logistics, supply chain, and content [71][72] Organizational Efficiency - Pinduoduo's flat and flexible organizational structure supports its rapid growth, with high per capita revenue and efficient operations [2][51] - Temu's team is composed of experienced executives from Pinduoduo's core businesses, ensuring strong execution capabilities [77]

Company Expansion - PDD Holdings is expanding its free delivery coverage to include countries such as Japan, Singapore, Taiwan, Korea, and Macau, with more countries expected to be added later [1] Industry Expertise - Astrada Advisors specializes in technology, media, internet, and consumer sectors in North America and Asia, offering actionable recommendations to enhance portfolio performance [1] - The firm leverages extensive local and global experience to provide a unique perspective on market developments, regulatory changes, and emerging risks [1] - Astrada Advisors integrates rigorous fundamental analysis with data-driven insights to understand key trends, growth drivers, and competitive landscapes [1] - The focus is on empowering investors with timely research and a comprehensive view of industry dynamics [1]

Stock Performance and Valuation - PDD Holdings' stock has declined by 33.4% in 2024, signaling concerns about the company's future prospects [1] - The company's forward P/E ratio of 7.98X is significantly below the industry average of 15.23X, reflecting market pessimism about its fundamental challenges [4][5] Financial Performance and Growth - Revenue growth slowed to 44% YoY in Q3 2024, down from 86% in Q2 2024, indicating a significant deceleration [1] - The Zacks Consensus Estimate for 2025 revenues is $65.75 billion, representing 19.8% growth from the previous year [12] - Earnings per share for 2025 are estimated at $12.21, suggesting 7.2% growth, but the estimate has been revised downward by 8.7% over the past 60 days [12] Operational Challenges - Management has acknowledged operational inefficiencies, including an aging team and lack of capabilities to leverage macroeconomic shifts [10] - The company faces higher operational costs compared to peers, which could persist into 2025 [10] Global Expansion and Regulatory Risks - PDD's international expansion through Temu faces challenges due to potential changes in de minimis rules by the Biden administration, which could eliminate tariff exemptions on key product categories [7] - Regulatory pressures and intense competition raise doubts about the sustainability of PDD's global growth strategy [7] Competitive Landscape - The Chinese e-commerce market is increasingly competitive, with pressure from established players like Amazon, eBay, and Alibaba, as well as new entrants [14] - PDD relies on price-based competition and promotional activities, which may not be sustainable as consumer preferences evolve and competitors innovate [14] Strategic Investments and Profitability - PDD is investing heavily in initiatives like the RMB10 billion merchant support program, which will pressure margins [11] - Management has warned that profitability will trend lower over the long term due to these investments and the unsustainability of high revenue growth [11] Conclusion - Despite PDD's strong market position and significant cash reserves of RMB308.5 billion, the combination of decelerating growth, margin pressure, and operational inefficiencies suggests continued underperformance into 2025 [15] - The company's heavy investment requirements and management's admissions of business model limitations justify the current valuation discount [15]

Investment Rating - Maintains a "Buy" rating for the company [1][4] Core Views - The company's main site revenue growth has slowed due to intense competition in the e-commerce industry [1] - The company is increasing investments in the supply side, which may pressure short-term profitability but is expected to support long-term growth [1][13] - The company's overseas market is steadily expanding, with TEMU now available in over 80 countries and regions [6] - The semi-hosted model introduced in North America and later in Europe, Japan, and South Korea is expected to partially mitigate overseas regulatory and policy risks [6] - The company's 24Q3 revenue grew by 44% YoY to 99.4 billion yuan, with marketing service revenue increasing by 24% and transaction service revenue growing by 72% [11] - The company's 24Q3 non-GAAP net profit increased by 61% YoY to 27.46 billion yuan, with a non-GAAP net margin of 27.6% [11] Revenue and Profit Forecasts - The company's 2024-2025 revenue forecasts are revised down to 3970/4771 billion yuan (previously 3990/4863 billion yuan), representing YoY growth of 60%/20% [1] - The company's 2024-2025 non-GAAP net profit forecasts are revised down to 1231/1380 billion yuan (previously 1282/1553 billion yuan), representing YoY growth of 81%/12% [1] Overseas Expansion - TEMU has been launched in over 80 countries and regions, with the semi-hosted model introduced in North America, Europe, Japan, and South Korea [6] - The company is focusing on compliance and building a healthy business environment for long-term overseas development [6] 24Q3 Performance - 24Q3 revenue grew by 44% YoY to 99.4 billion yuan, driven by a 24% increase in marketing service revenue and a 72% increase in transaction service revenue [11] - 24Q3 non-GAAP net profit increased by 61% YoY to 27.46 billion yuan, with a non-GAAP net margin of 27.6% [11] - The company's revenue growth was impacted by increased competition and internal investments [11][13]

Core Viewpoint - PDD Holdings Inc. Sponsored ADR has experienced a significant decline in stock performance, with a return of -15.1% over the past month, contrasting with the Zacks S&P 500 composite's increase of +3.6% [2] Earnings Estimates - For the current quarter, PDD is expected to report earnings of $2.56 per share, reflecting a year-over-year increase of +6.7%, although the Zacks Consensus Estimate has decreased by -3.4% in the last 30 days [5] - The consensus earnings estimate for the current fiscal year stands at $11.39, indicating a substantial increase of +73.6% from the previous year, but this estimate has also been revised down by -8.5% [5] - For the next fiscal year, the earnings estimate is $12.21, suggesting a growth of +7.2% year-over-year, with a recent downward revision of -8.2% [6] Revenue Growth - The consensus sales estimate for the current quarter is $15.68 billion, which represents a year-over-year growth of +25.2% [10] - For the current fiscal year, the revenue estimate is $54.89 billion, indicating a growth of +58.4%, while the next fiscal year's estimate of $65.75 billion reflects a growth of +19.8% [10] Recent Performance and Surprises - In the last reported quarter, PDD Holdings Inc. achieved revenues of $14.16 billion, marking a year-over-year increase of +50.1%, with an EPS of $2.65 compared to $1.55 a year ago [11] - The company reported a revenue surprise of -2.16% against the Zacks Consensus Estimate and an EPS surprise of -6.03% [11] - Over the last four quarters, PDD has surpassed consensus EPS estimates three times and revenue estimates two times [12] Valuation - PDD Holdings Inc. is graded B in the Zacks Value Style Score, indicating that it is trading at a discount compared to its peers [16] - Valuation multiples such as price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF) are essential for assessing whether the stock is overvalued, fairly valued, or undervalued [14][15] Overall Outlook - The Zacks Rank for PDD Holdings Inc. is 4 (Sell), suggesting potential underperformance relative to the broader market in the near term [7][17]

Group 1: Market Position and Performance - Temu, owned by China's PDD Holdings, has become a leading e-commerce app in the U.S., topping Apple's list of most downloaded free apps for the second consecutive year, indicating significant success for Chinese apps in the U.S. consumer market [3] - Temu's entry into the U.S. market in 2022 has put pressure on established competitors like Amazon, showcasing its rapid growth and popularity among American consumers [1][3] Group 2: Regulatory and Political Environment - The Biden administration has proposed changes to the "de minimis" provision, which currently allows shipments valued under $800 to be exempt from import duties, potentially impacting the competitiveness of companies like Temu and Shein [4][7] - Donald Trump's return to the White House could lead to increased tariffs on Chinese imports, with proposals suggesting tariffs could reach between 60% to 100%, adding uncertainty for companies relying on low-cost imports from China [5] - Concerns over Chinese imports are not limited to the U.S.; Southeast Asian countries like Vietnam and Indonesia have implemented anti-dumping tariffs, and Vietnam has recently banned Temu from operating in its market [6] Group 3: Economic Impact - A report from Nomura indicates that changes to the de minimis rule could be a significant trade priority for the Trump administration, potentially affecting U.S.-China trade relations [7] - Nomura estimates that a U.S. ban on all de minimis imports from China could reduce China's annual export growth by 1.3% and negatively impact GDP growth by 0.2% in 2025 [8]

Core Viewpoint - PDD's share price has declined 29% in 2023 despite significant revenue growth, raising questions about whether expectations have been reset for a potential recovery in 2025 [3][11]. Group 1: Business Overview - PDD operates two e-commerce platforms: Pinduoduo, which focuses on group-buying in China, and Temu, which targets international markets with a traditional e-commerce model [4][6]. - Pinduoduo's integration with WeChat enhances consumer engagement through social sharing and group purchasing incentives [4]. - Temu competes by offering low prices sourced directly from Chinese manufacturers, with less emphasis on gamification compared to Pinduoduo [6]. Group 2: Revenue Streams - PDD's revenue is divided into marketing services and transaction revenue, with transaction revenue growing three times faster than marketing revenue in the last quarter [7]. - Analysts expect PDD's revenue to grow by 32% over the next 12 months, with adjusted earnings per share anticipated to grow by 16% [11]. Group 3: Market Position and Valuation - PDD's asset-light model allows for higher margins compared to competitors like JD and Alibaba, despite all three trading at similar forward P/E multiples [10][11]. - PDD's forward P/E has decreased by 60% this year to just over 9x, and its PEG ratio is around 0.4, indicating a lower market valuation relative to expected earnings growth [12]. Group 4: Risks - Proposed changes to U.S. de minimis rules could impact Temu's low-cost model, potentially raising costs for products that fall under the exemption [8]. - A slowdown in the Chinese economy is another risk, although projections indicate only a minor GDP growth decline of 0.4% in 2025 [9].

Core Viewpoint - PDD Holdings Inc. has experienced a 50% decline in stock price since its peak in February 2021, despite strong operational performance, amid a prolonged bear market in China lasting 36 months [1]. Company Performance - The stock price of PDD Holdings Inc. has decreased significantly, indicating a disconnect between market performance and operational success [1]. Investment Philosophy - The investment strategy focuses on identifying businesses that solve real problems, with the potential for significant price appreciation over a 2-5 year horizon [1]. - The goal is to manage a $10 million investment portfolio, primarily in stocks and real estate, aiming to outperform the S&P 500 and achieve financial independence by 2035 [1].

Holiday Season Strategy - PDD Holdings and Shein are preparing for the Holiday season by offering deep discounts on toys and products from U S vendors [1] Analyst Position - The analyst holds a beneficial long position in PDD Holdings and BABA through stock ownership options or other derivatives [1] Disclosure - The article expresses the analyst's own opinions and is not compensated by any company mentioned [1]