Pinduoduo (PDD) Surges Following Strong Q3 Upside Results
2:46 pm Monday, November 28th, 2022
Pinduoduo (PDD) is surging today after the Chinese ecommerce giant reported strong upside Q3 results for both EPS and revenue. Revenue jumped 65% yr/yr to $4.99 bln, a significant acceleration from 36% growth in Q2 and 7% in Q1. We were not really sure what to expect given the COVID lockdowns during the quarter and the impact that might have. Also, the slowing economy in China was a concern that perhaps consumers would pull back on spending.
On the other hand, PDD’s high exposure to agriculture likely helped results. PDD’s online platform primarily connects farmers with consumers directly to sell fruits and vegetables. However, Pinduoduo also sells lots of other categories, including electronics, home appliances, cosmetics etc. Of note, while PDD operates primarily in China, it has been starting to branch out into international markets. We were interested to hear of any developments.
PDD has said before that it would not just simply repeat what others have done. It will strive to create its own unique value regarding services like Temu. PDD has been able to take share from larger peers in China like BABA and JD by focusing on extreme value pricing. Based on prior comments, it sounds like that will be its strategy to challenge AMZN in the US.
Overall, this was another impressive quarter for PDD as it follows up a strong upside result in Q2 as well. A beat was not a huge surprise given that BABA very strong results a couple of weeks ago. However, PDD reported surprisingly large upside results, which is propelling the stock. Investors were not expecting this much upside. In fairness, PDD did caution on the call that this current level of profitability in Q3 is temporary and unlikely to be maintained as it plans to increase investments.
We are intrigued by PDD’s international expansion plans. We plan to keep a close eye on Temu although we remain skeptical it can really challenge Amazon. However, its extreme value pricing might give it a plate at the table as consumers tighten their belts, but we will see.
