PDD Holdings (NASDAQ:PDD) isn’t a famous name in the U.S., but keep your eyes peeled, as this company could become a miniature version of Alibaba (NYSE:BABA) or even Amazon (NASDAQ:AMZN) someday. I am bullish on PDD stock and believe that it can head to $200. When you see PDD’s revenue growth, you might actually want to take a share position today.
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PDD Holdings, commonly just called PDD, is the parent company of the e-commerce platform Temu. A couple of years ago, Wish.com — owned by ContextLogic (NASDAQ:WISH) — was the popular e-commerce site to buy Chinese products.
Lately, however, many American shoppers have turned to heavily advertised Temu for cheap items. WISH stock hasn’t been a long-term winner, so why would U.S. stock traders choose to own PDD stock? The answer, as usual, can be found within the data and the company’s impressive growth trajectory.
PDD: Politicians vs. Shoppers
Before delving into PDD’s latest round of quarterly data, it’s worth noting that the company is popular among U.S. shoppers but not necessarily beloved among politicians. This creates a sense of tension, but this really shouldn’t be a deal breaker for prospective PDD stock investors.
Surely, you’ve heard about the proposed U.S. TikTok ban by now. At this point, it’s hard to predict whether Chinese-owned TikTok will actually be banned by the U.S. government.
Still, this raises a crucial question: If TikTok is banned, could Temu be next? This possibility could explain why, according to The Information (via TheFly), PDD wants to “reduce its reliance on the U.S. market.”
This might be easier said than done, as the U.S. comprises around 60% of Temu’s total merchandise sales. Reportedly, Temu is looking to reduce that number to just 30% by 2025 and put more focus on Europe, Japan, South Korea, and the Middle East.
Analysts are undoubtedly aware of this situation, but as we’ll discuss in a moment, they’re still mostly bullish about PDD stock. They don’t seem too worried, and I’m also not losing sleep about PDD’s status in the U.S. The wheels of government typically turn slowly, and banning Chinese technology businesses in the U.S. isn’t something that’s going to happen tomorrow or next week, if it happens at all.
PDD’s Numbers Are Indisputably Good
Rather than scour the headlines for clues that the government might ban Temu, why not just stick to the facts? For example, it’s a fact that PDD Holdings’ revenue is growing by triple digits percentage-wise.
You might want to make sure you’re sitting down when you read these numbers. In the fourth quarter of 2023, PDD Holdings’ revenue grew by 123% year-over-year to the equivalent of $12.5 billion. This result surpassed the analyst consensus estimate by $1.47 billion.
In that same time frame, PDD’s operating profit jumped by 146% to $3.15 billion, and the company’s net income attributable to ordinary shareholders increased by 146% to $3.28 billion. Additionally, PDD easily beat Wall Street’s earnings forecast for Q4 2023, as the company’s earnings per American depository share (EPADS) of $2.41 beat the consensus call for EPADS of $1.57.
Is this a fluke or a pattern? I’d say it’s not just a fluke, as PDD Holdings’ fourth-quarter 123% revenue growth comes on the heels of a 94% year-over-year revenue increase in Q3 of 2023. Also, the latest report represents PDD’s fourth consecutive quarterly earnings beat.
Sure, much of this success can be attributed to Temu’s popularity in America. However, bear in mind that PDD Holdings also owns and operates Pinduoduo in China. Since China’s economy has been shaky in recent years, Pinduoduo could continue to contribute significant revenue to PDD as consumers seek low prices.
Is PDD Stock a Buy, According to Analysts?
On TipRanks, PDD comes in as a Strong Buy based on eight Buys and one Hold rating assigned by analysts in the past three months. The average PDD Holdings stock price target is $181.44, implying 37.4% upside potential.
If you’re wondering which analyst you should follow if you want to buy and sell PDD stock, the most profitable analyst covering the stock (on a one-year timeframe) is Fawne Jiang of Benchmark Co., with an average return of 90.49% per rating and a 77% success rate. Click on the image below to learn more.
Conclusion: Should You Consider PDD Stock?
Temu getting banned in the U.S. is possible but isn’t likely a near-term threat. Instead of worrying about what might happen, investors should focus on the established facts. One of those facts is that Temu already operates in 51 global markets.
Another fact is that PDD Holdings’ revenue more than doubled year-over-year. In addition, PDD doesn’t solely rely on Temu in the U.S., as the company also operates the Pinduoduo platform in China.
On top of all that, PDD Holdings outpaced Wall Street’s top-line and bottom-line forecasts in 2023’s fourth quarter. So, the worrywarts can choose to avoid PDD stock due to perceived political risks. However, I’m choosing to focus on the data, and I’m definitely considering an investment in PDD today with a personal share-price target of $200 in 2024.
