JD.com versus PDD - which is a Better Buy?
πππJD.com $JD.com(JD)$
To determine which is a Better Buy, let's check out their Q3 24 results.
PDD Q3 24 Earnings Results
On November 21, PDD announced its Q3 24 results with total revenue for the quarter at RMB 99.4 billion (USD 14.16 billion), a 44% year over year revenue growth. However this is a far cry from Q1 2024 with a 130% year over year increase and 90% year over year rise in Q2 2024. PDD's growth momentum has noticeably decelerated, raising red flags about its ability to maintain its historical growth trajectory.
PDD faces intensified competition and headwinds from its competitors such as Amazon, Alibaba and JD.com.
Despite reporting a 61% increase in Net Income to RMB 25 billion (USD 3.56 billion), Operating expenses rose 39% to RMB 35.4 billion with sales and marketing expenses jumping 40% to RMB 30.5 billion. There is also a 138% increase in general and administrative expenses to RMB 1.81 billion.
PDD's RMB 10 Billion fee reduction program which is aimed at supporting merchants, could impact profitability significantly. PDD's Management has warned that profitability may gradually trend lower over the long run as PDD continues to invest in merchant support and ecosystem development. This could affect margins and earnings growth.
Another concern is PDD's decline in operating cash flow which fell to RMB 27.5 billion from RMB 32.5 billion in the previous year quarter.
However Wall Street Analysts are still Bullish on PDD with a Buy rating, Average Target price of USD 148.24, an upside potential of 53% according to Tipranks.
JD.com Q3 24 Earnings Results
JD.com exceeded market expectations in its Q3 24 results, reporting adjusted earnings of USD 1.24 per share, surpassing consensus estimate by 13.7%. JD's revenues reached USD 37.1 billion, beating the consensus mark by 1.5% and marking 5.1% year over year growth, demonstrating resilience in a challenging market environment.
JD.com's operating margin expanded to 4.6% from 3.8% year over year, showing notable improvements in its operational efficiency. Non GAAP operating margin rose to 5%, up from 4.5%, while net margin increased significantly to 4.5% from 3.2%.
JD.com has made significant strides in expanding its market presence. JD.com has expanded into premium fashion with its partnership with luxury brands Balenciaga and Saint Laurent, a strategic push into higher margin segments.
JD.com's global sales business focuses on serving overseas Chinese consumers with a diverse array of high quality branded products. These include electronics, small appliances, home goods, apparel, beauty products and much more.
JD.com's ECommerce business caters to Chinese customers in the US and overseas as they don't even have an official English version of their website. The prices are in RMB and the description are in Chinese. So JD.com does not generate any material ECommerce business from the US compared to PDD.
In contrast PDD's international subsidiary Temu is very popular in the US due to its low prices, app gamification and marketing blitz.
With Donald Trump's Election win, he intends to levy 10% to 20% tariffs in imports and up to 60% to 100% tariffs on Chinese goods. Whether to take these statements literally or consider them negotiating tactics remains to be seen. PDD will be more affected than JD.com as the former has more exposure to the US market.
Wall Street Analysts are bullish on JD.com with a Buy rating, Average Target price of USD 48.15, an upside potential of 28%.
Both PDD and JD.com are undervalued but I believe that JD.com has a slight edge as it is less exposed by Trump tariffs.
JD.com is more diversified as it has a healthcare division, JD Health which has enabled online payments through individual medical insurance accounts in China, serving more than 100 million people. JD Logistics' recent collaboration with Taobao and TMall Group marks a significant expansion of its delivery network, opening new revenue streams and enhancing competitive positioning.
What I like about JD.com is its commitment to shareholders return as evidenced by the completion of its USD 3 billion share repurchase program and the announcement of a new USD 5 billion share repurchase program through to August 2027.
JD.com also pay dividends once a year. The current dividend yield is 1.98%. In contrast PDD does not pay any dividends.
JD.com has outperformed PDD as its share price is up 37% year todate while PDD is down 33% year todate.
I am so glad that I have invested in JD.com as I am currently up 29%.
JD.com versus PDD - for me, JD.com is a better buy.
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From a personal perspective, I am also more inclined towards JD.com. PDD is too exploitative and not conducive to long-term development