Since July this year, Pinduoduo's US stock has surged 22%, far outperforming its main competitors Alibaba and JD.com. Behind this stock price trend, it reflects the strong performance of Pinduoduo in seizing market share both domestically and internationally, which has gained unanimous support from Wall Street.
With the promotion of this year's Double Eleven Festival in full swing, Wall Street market professionals are betting that Pinduoduo's Double Eleven sales performance will surpass the others and add another spark to its already high stock price.
Pinduoduo is expected to become the biggest winner of Double Eleven
With the recent surge in Pinduoduo's stock price, its expected P/E ratio has reached 19 times, more than twice the valuation of Alibaba and JD.com. Some people believe that considering that Pinduoduo's sales for the entire year of this year are expected to increase by 57% year-on-year, which is more than five times the expected growth rate of its competitors, this price to earnings ratio gap is also reasonable.
Pinduoduo's stock price has been rising for several consecutive months
And the next catalyst for the company's stock price may be coming: with the arrival of the Double Eleven shopping season, Wall Street analysts expect Pinduoduo to become the largest winner among domestic Double Eleven e-commerce platforms this year.
Citigroup analyst Alicia Yap wrote in a report that although Pinduoduo's emphasis on the Double Eleven promotion is slightly weaker compared to Alibaba and JD, its promotional activities such as "billions in subsidies" and "annual price reduction list" will help drive further revenue growth, and its sales growth will outperform its peers.
Citigroup predicts that the total sales of Pinduoduo during the Double Eleven promotion period are expected to increase by approximately 25% to 30%, while sales of Alibaba and JD are expected to increase by less than 10% year-on-year.
Although there are concerns about Pinduoduo's profitability under the pressure of high promotional expenses, Wall Street market participants still believe that Pinduoduo's stock price will further rise in the future. At present, in the US stock market, the put/call ratio of the stock has fallen from its September high, indicating that option traders are increasingly bullish towards the stock, and short positions have also fallen to record lows due to the withdrawal of short positions.
Can Pinduoduo's Q3 financial report add another spark?
In addition to Double Ten One, on the 23rd of this month, Pinduoduo will also release its third quarter results, which may become another driving force for its stock price. For Pinduoduo, its third quarter loss situation will become the focus of external attention, and the sustainability of its money burning business model, regulatory resistance, and its future potential are also worth discussing in the market.
Bloomberg Intelligence analyst Catherine Lim said that if Pinduoduo's financial report exceeds market expectations, such as a lower than expected loss margin and a revenue increase of over 50% in the second half, the stock's valuation may further rise.
Goldman Sachs Group expects strong revenue growth for Pinduoduo in the third quarter. Despite Goldman Sachs analyst Ronald Keung warning that Temu, a cross-border platform under Pinduoduo, may experience greater losses than expected. But he also wrote in the report that in the context of faster than expected GMV growth, investors will gradually be willing to give Temu's business a higher valuation.
Xin Yao Ng, head of Asian equity investment at abrdn plc, said Pinduoduo is expected to continue expanding its share in the domestic market. Meanwhile, given Temu's good development momentum, if Pinduoduo can continue to reduce overseas losses and maintain overall profit growth, the company's stock price will appear "very cheap".