- Should you buy the Pinduoduo Inc (NASDAQ: PDD) stock or sell it now? Here is some information to help you decide.
Pinduoduo Inc (NASDAQ: PDD) is one of the largest interactive e-commerce platforms in China and throughout the world. And it is considered the second-largest online marketplaces in China based on the number of users and orders. Plus the company’s stock price has had one of the best returns, especially for early investors.
Ever since the company went public in 2018, its stock price grew over 214%. However, the stock price dropped about 13.52% on Friday following the second-quarter earnings report, which was below analyst expectations.
Interestingly, the stock price dropped due to the top-line missing expectations. But the bottom-line was well above expectations. Pinduoduo Inc (NASDAQ: PDD) said its sales for the quarter increased 67% to 12.2 billion yuan, but the expectations were closed to 13 billion yuan.
“In the second quarter of 2020 we continued to devote resources to support economic recovery across China, and we witnessed great resilience amongst our merchant community,” said Lei Chen, Chief Executive Officer of Pinduoduo Inc (NASDAQ: PDD). “We also continued our investments in user engagement and expanded our promotional offerings to cover more household necessities and agriculture products based on user demand. Our users’ increasing recognition of Pinduoduo’s value proposition contributed to the user base growth and user activities on our platform.”
The net losses for the company shrunk to 899 million yuan (0.75 yuan per share), which substantially exceeded the expected per-share loss of about 1.25 yuan to 1.30 yuan per loss.
In terms of the other metrics, Pinduoduo Inc (NASDAQ: PDD) saw significant increases with gross merchandise volumes increasing 79% and average monthly active users jumping 55% to 569 million. Plus the number of active buyers on the platform went up 41% to 683 million. The active buyers spent around 27% more than they did during the same period a year ago.
“For the quarter ended June 30, 2020, our total revenues increased by 67% year-over-year to RMB12,193.3 million, driven primarily by growth in our online marketing services revenues. We observed healthy recovery in advertising demand from our merchants during the quarter,” added Tony Ma, Vice President of Finance at Pinduoduo Inc (NASDAQ: PDD). “In addition to merchants deferring their marketing spend to the June quarter, we would attribute such increase to better returns as a result of higher user engagement on our platform and more compelling advertising product offerings.”
Net cash from operating activities for the company RMB,495.3 million (US$777.8 million), compared to RMB,148.0 million in the same quarter of 2019 — primarily due to an increase in online marketing services revenues. And the company’s cash, cash equivalents, and short-term investments were RMB49.0 billion (US$6.9 billion) as of June 30, 2020, compared to RMB41.1 billion as of December 31, 2019.
Pinduoduo Inc (NASDAQ: PDD) Stock: Should I Buy It Now?
Personally I believe that the 13% drop on Friday presents a buying opportunity for Pinduoduo Inc (NASDAQ: PDD). The stock price closed at $84.00 on Friday and the 52-week high for the company was $98.96. I think that the company should hit that number again inevitably sometime within the next few months. I recommend buying and holding PDD for the long-haul.
In an analyst consensus report, I am seeing that 6 analysts are saying strong buy; 13 are saying buy; 11 are neutral; 3 say sell; and 0 say strong sell.
When deciding whether to buy a stock, I also strongly consider the stock price charts. For PDD, the company saw a return of over 131% in 6 months, over 122% year-to-date, over 223% in the last year, over 343% in the past two years, and over 214% since going public.
Disclosure: I own a small number of Pinduoduo Inc (NASDAQ: PDD) shares. I wrote this article myself and I do not have any business relationship with any company whose stock I write about. I am not a financial advisor and all articles are my opinion. You should do your own due diligence and consider talking to a financial professional before investing.