Pinduoduo Inc. (PDD) has seen steady upward momentum over the past six months, outperforming the S&P 500 and rising by approximately 370.0 % compared to the S&P’s gain of about 16.3%. Despite the Shanghai-based company’s impressive performance, the company recently slid on the WhaleWisdom HeatMap to a ranking of 38, down from 10. Hedge Funds are buying, though, as analysts are raising price targets.
Pinduoduo operates an interactive e-commerce platform and is one of China’s largest online marketplaces, serving customers worldwide. The company appears to be benefitting from changes in shoppers’ habits during the coronavirus pandemic, which has brought higher sales. Pinduoduo boasts a customer to business (C2B) model that allows it to eliminate distributors and ship directly to manufacturers. Additionally, Pinduoduo has shifted a portion of efforts into the online grocery market, which offers further business opportunity as consumers have sought online food shopping opportunities at an increased rate throughout the pandemic.
Hedge Funds Are Buying
Pinduoduo has captured hedge funds’ attention, with aggregate 13F shares held increasing by about 22.4% in the third quarter. This healthy increase brought shares held to about 74.3million from 61.6 million. Of the hedge funds, 24 created new positions, 29 added to existing holdings, 15 closed out their position, and 21 reduced their stakes. In slight contrast to hedge funds, institutions decreased their aggregate holdings by about 2.5%, to approximately 226.8 million from 232.7 million.
Pinduoduo is viewed positively by many prominent investment banks and financial services companies such as Goldman Sachs Group, Inc., Bank of America Corp. (BofA), and Barclays PLC. Pinduoduo may also benefit from a recent regulatory probe into its competitors, which may curb monopolistic conduct and open up Pinduoduo’s options for working with merchants. Analyst Jerry Liu from UBS Securities Ltd. believes the anti-monopoly probe is likely to lower pricing and result in Pinduoduo’s top competitors being less aggressive with merchants. Barclay’s analyst, Gregory Zhao, raised Pinduoduo’s price target to $125 from $79, keeping an equal weight rating on the shares.
Encouraging Multi-Year Estimates
After year-over-year revenue growth of about 80.9% in 2020, analysts anticipate continued growth in revenue from 2021 through 2023. Pinduoduo is forecast to grow revenue in a range of approximately 19% to 81%, which would bring revenue estimates of roughly $12.1 billion in December 2021, later increasing to about $19.8 billion in 2023. Rising year-over-year estimates are predicted for earnings as well, climbing to $3.32 in 2023, up from -$0.37 in 2020.
Pinduoduo’s 2020 profit growth helped demonstrate the company as a formidable player in e-commerce. Its multi-year estimates are encouraging for investors. The company has shown positive momentum amidst the coronavirus pandemic and strategically chosen new business ventures with future potential.