PDD Holdings: Geopolitical Uncertainties Unveils Attractive Buy-The-Dip Opportunity

seekingalpha07-19

PDD Holdings Inc. investors have found the $165 resistance level challenging to surpass.PDD's Temu cross-border platform is facing challenges from Amazon's potential forays.The company's sustainable ...

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Buy-The-Dip Opportunity\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-07-19 20:30 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4704857-pdd-holdings-geopolitical-uncertainties-unveils-attractive-buy-the-dip-opportunity><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>PDD Holdings Inc. investors have found the $165 resistance level challenging to surpass.PDD's Temu cross-border platform is facing challenges from Amazon's potential forays.The company's sustainable ...</p>\n\n<a href=\"https://seekingalpha.com/article/4704857-pdd-holdings-geopolitical-uncertainties-unveils-attractive-buy-the-dip-opportunity\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"LU0052750758.USD","symbol_name":"富兰克林中国基金A 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Robert WayPDD Holdings (NASDAQ:PDD) investors have much to consider as its buying sentiment stuttered as it faced significant resistance under the $165 level. As a result, the stock's upward momentum fizzled out as sellers took profit. That level also saw investors similarly take profit at the end of 2023 and early 2024 before it bottomed in March. PDD revenue segments (FinChat)In my previous bullish PDD article in May, I highlighted why I decided to upgrade my thesis on the company. PDD's Q1 earnings release in late May underscores its ability to continue outpacing its rivals. In addition, the surge in Transaction Services revenue over the past year justifies PDD stock's outperformance. The segment's stellar performance is attributed to Temu's success, which has helped the company expand its foothold in international e-commerce markets. Notwithstanding the recent pullback, the stock is up more than 65% over the past year, demonstrating its resilience and the market's confidence. Therefore, investing in China's leading social e-commerce platform leader has reaped significant rewards for investors over the past two years. China's economic malaise has benefited value players like PDD, as consumer spending in China remains relatively tepid. PDD's ability to achieve sustainable profitability (\"A+\" profitability grade) has helped to keep growth investors onside as the company continues its global expansion plans. Notwithstanding my optimism, investors must closely monitor developments relating to Amazon's (AMZN) potential entry into Temu's space. AMZN has likely studied the success of Temu and Shein closely, as they could threaten Amazon's e-commerce dominance in its most significant geographical markets. Despite that, I assess that PDD has taken several years to develop its network effects moat in China, amassing significant leverage with its direct sales business. Therefore, Amazon's attempt to establish a comprehensive and effective cross-border e-commerce business to outperform Temu and Shein is expected to be highly challenging. Furthermore, Temu has also reportedly diversified its cross-border e-commerce strategy with a more \"localized\" approach to competing with Amazon. Accordingly, Temu \"is now enrolling Chinese sellers with inventory in US warehouses.\" As a result, it facilitates the ability of US-based suppliers to \"ship directly from US locations.\" Temu has reportedly lifted the GMV contribution from this segment to 20% of its US GMV, underscoring the success of its strategy. Consequently, I view Amazon's decision to counter Temu's success as likely necessary to hinder Temu's market share gains. Therefore, investors are urged to pay close attention to these developments, as Temu is a critical growth pillar in PDD's long-term game.   PDD Quant Grades (Seeking Alpha)PDD's bullish thesis has remained robust. Seeking Alpha Quant assigns \"A\" and \"B\" range grades for the stock, underpinning my conviction. Analysts have upgraded their estimates on PDD, bolstering the market's confidence in the company's proposition. However, I must caution investors that the current geopolitical climate remains perilous as the US attempts to crimp China's capabilities further. In addition, the US Congress could also move forward to revise the De Minimis \"loophole,\" hampering Temu's cross-border efforts. The surge in air freight attributed to Temu and Shein suggests the revenue exposure that could be at risk due to potential regulatory headwinds. In addition, investors must also consider the increased prospects of a second Trump administration. Recent polls suggest Trump's lead has widened, raising the prospects of Trump's return. Recent reports suggest waning support for President Biden for a second term have heightened the uncertainties in the US political climate. These developments may not be favorable for PDD, given its Chinese roots. As a result, I assess that a substantial valuation re-rating may not be likely in the near term. PDD price chart (weekly, medium-term) (TradingView)PDD's uptrend bias is still intact. The stock's $110 critical support level must be watched closely, as a decisive breakdown below that level could lead to a steeper selloff. However, that isn't my base case for now, as PDD's upward momentum remains solid. Its \"B+\" momentum grade undergirds my conviction, suggesting a buy-the-dip opportunity is still appropriate. Rating: Maintain Buy. Important note: Investors are reminded to do their due diligence and not rely on the information provided as financial advice. Consider this article as supplementing your required research. Please always apply independent thinking. Note that the rating is not intended to time a specific entry/exit at the point of writing, unless otherwise specified. I Want To Hear From You  Have constructive commentary to improve our thesis? Spotted a critical gap in our view? Saw something important that we didn’t? Agree or disagree? Comment below with the aim of helping everyone in the community to learn better!","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"1","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.26.3","shortVersion":"4.26.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2452147882"}