The Chinese e-commerce leader, PDD Holdings (PDD -4.09%), continues to impress with its strong performance in the market. While other Chinese stocks like Alibaba (BABA -0.38%) and JD.com (JD 2.25%) have seen declines, PDD’s stock price has rallied 80% over the past year.
Despite this remarkable growth, some investors may be wondering if there is still room for more growth. Here are four compelling reasons why PDD remains a worthwhile investment:
1. PDD is China’s fastest-growing e-commerce leader
PDD, also known as Pinduoduo, was established just nine years ago and has quickly become a dominant player in the Chinese e-commerce market. Its unique discount marketplace strategy resonated with shoppers in lower-tier cities, driving significant growth. Additionally, PDD’s move into the agricultural sector further diversified its revenue streams and set it apart from competitors like Alibaba and JD.
From 2018 to 2023, PDD achieved an impressive compound annual growth rate (CAGR) of 80%, outpacing Alibaba and JD. Analysts project continued growth for PDD, with a CAGR of 38% from 2023 to 2026.
2. PDD’s profits are soaring
PDD achieved profitability in 2021, and its net income saw significant growth in the following years. By shifting to a higher-margin third-party marketplace model and optimizing its logistics, PDD has managed to substantially increase its profits. Analysts forecast a 47% CAGR in net income from 2023 to 2026.
3. PDD isn’t facing antitrust scrutiny
Unlike Alibaba, which was hit with a hefty fine and regulatory restrictions in 2021, PDD has avoided significant antitrust scrutiny. This gives PDD a competitive advantage and more room for growth without the regulatory hurdles faced by its competitors.
4. PDD’s stock is attractively priced
With a price-to-earnings ratio of just 13, PDD’s stock is considered undervalued compared to its potential for profit growth. In comparison, Alibaba and JD trade at higher multiples. As tensions in the Chinese market ease, PDD’s stock may become an even more appealing investment option.
Overall, PDD’s strong growth prospects, increasing profits, regulatory advantage, and attractive valuation make it a compelling investment opportunity in the Chinese e-commerce market.
Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JD.com. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.