tiprankstipranks
Here’s Why Pinduoduo (NASDAQ:PDD) Stock Jumped Yesterday Despite the Market Retreat
Market News

Here’s Why Pinduoduo (NASDAQ:PDD) Stock Jumped Yesterday Despite the Market Retreat

Story Highlights

Pinduoduo has delivered strong Q2 numbers on top-line as well as bottom-line fronts. At the same time, favorable macro developments point to buoyant investor sentiment about the stock.

While the tech-heavy NASDAQ (NDX) index dropped 1% yesterday, shares of the biggest agriculture platform in China, Pinduoduo Inc. (PDD) (GB:0A2S), jumped 14% after the company delivered robust second-quarter numbers.

Buoyed by recovering consumer sentiment and higher online marketing services and transaction services revenues, PDD’s top line jumped 36% year-over-year to $4.7 billion. EPS at $1.09 outperformed estimates by a wide margin of $0.66. Furthermore, lower business-related expenses and the postponement of certain projects resulted in an increase in operating profit of 231% over the prior year period to $1.57 billion.

Additionally, yesterday, PDD unveiled its ’10 Billion Agriculture Initiative’ with the aim of boosting agritech and fostering digital inclusion. Under this initiative, PDD is focusing on making markets accessible through its E-commerce platform. Impressively, the company has trained over 100,000 farmers in adopting E-commerce and currently has over 880 million users.  

Favorable Macro Trends Bode Well for PDD

PDD shares are now up 30.2% over the past five days as investor sentiment remains buoyant owing to favorable developments. The Chinese government has announced new stimulus spending to support the domestic economy. Additionally, the U.S. and China are closer to an agreement to allow access to records of Chinese names listed in New York to the U.S. auditors. A final agreement would resolve a long-term bone of contention between the two countries and alleviate delisting risks for a number of Chinese names as well.

Is PDD a Good Stock to Buy?

Despite the recent price run-up, PDD shares are still down 30.5% over the past year and Wall Street is cautiously optimistic about the stock with a Moderate Buy consensus rating and an average price target of $72.20.

Benchmark Co. analyst Fawne Jiang is even more positive about PDD and yesterday reiterated a Buy rating on the stock while increasing the price target to $107 from $85. The higher price target implies a significant 62.02% potential upside in the stock.

The analyst believes PDD’s business model has long-term operating leverage and noted the Q2 performance came on the back of robust execution, value-for-money offerings, and the ability to tap rising demand from consumers.

Bloggers too are sharing this enthusiasm about PDD, our data crunch at TipRanks shows 93% of the bloggers covering PDD are Bullish about the stock. In comparison, the sector average only stands at 65%.

Closing Thoughts

Yesterday, 75.11 million PDD shares changed hands. In comparison, the average volume over the past 30 days was only ~11.8 million. This shows how significant yesterday’s upward movement was. Further, a return on equity of 19.19% and asset growth of 13.65%, when coupled with PDD’s strong Q2 performance, are compelling metrics for investors.

Read full Disclosure

Trending

Name
Price
Price Change
S&P 500
Dow Jones
Nasdaq 100
Bitcoin

Popular Articles