Alibaba vs. PDD: Which Stock Should You Bet On?

Alibaba and PDD: The Race for Market Supremacy

Revenue and Profit Margin: Alibaba's Stroll vs. PDD's Sprint

In 2024, Alibaba and PDD are battling for market supremacy. Alibaba, the seasoned veteran, reported a revenue of RMB 941,168 million (US$130,350 million) for the fiscal year ending March 31, 2024—an 8% increase. Their net income, however, was RMB 79,741 million (US$11,044 million), giving them a net profit margin of about 8.5%. Respectable, but not exactly headline-grabbing.

Enter PDD Holdings, the sprightly newcomer, with a jaw-dropping 131% increase in revenue for the first quarter alone, reaching RMB 86,812.1 million (US$12,023.3 million). Their net income stood at RMB 24,418 million (US$3,382 million), translating to a beefy 28.1% net profit margin. If Alibaba is taking a leisurely stroll, PDD is sprinting like it’s got rocket boosters.

Revenue and Earnings Growth Forecast: Alibaba vs. PDD (2022-2027)

Cash Flow: Alibaba's Drizzle vs. PDD's Downpour

Alibaba’s cash flow situation looks a bit like a drizzle in a drought. Net cash from operating activities was RMB 23,340 million (US$3,233 million) for the quarter ending March 31, 2024, a 26% decline year-over-year. Their free cash flow didn’t fare much better, plummeting 52% to RMB 15,361 million (US$2,127 million).

PDD, on the other hand, is experiencing a cash flow downpour, with their substantial revenue and net income increases suggesting they're swimming in cash. The exact figures might be elusive, but the signs point to PDD’s cash flow being as lively as a river in the rainy season.

Analyst Future Growth Forecasts: Alibaba vs. PDD in Earnings and Revenue

Valuation: Market's Sweetheart

As it stands, Alibaba’s market capitalisation is about US$196 billion. PDD, meanwhile, has surged ahead with a market cap of US$208 billion. This isn’t just a popularity contest; the market is clearly smitten with PDD’s growth and profitability prospects. It seems the market's darling has shifted from the established giant to the dynamic upstart.

Shareholder Dilution: The Thinning Line

Alibaba is trying hard to keep its shareholders happy, repurchasing US$12.5 billion of shares and approving a US$4.0 billion dividend. But the spectre of shareholder dilution looms due to their foray into multiple business segments. It’s a bit like trying to juggle too many balls at once—impressive, but risky.

PDD, by contrast, doesn’t have significant dilution concerns, making it a more straightforward pick for investors. No juggling here, just a steady hand on the tiller, which is always a good sign for those holding shares.

The Final Verdict: Who Takes the Crown?

While PDD is the hotshot on the court, Alibaba remains a titan with a loyal customer base, brand recognition across the globe, and a diversified business that includes its fast-growing cloud computing arm, Alibaba Cloud. This diversified portfolio ensures Alibaba has multiple revenue streams and a strong foundation to weather market changes.

$PDD Holdings Inc(PDD)$ $Alibaba(BABA)$

However, PDD is still a young pup in the game, and investors should be aware of potential risks down the road, such as increased competition from established players or changes in government regulations. The excitement around PDD’s rapid growth is palpable, but like any sprinter, there's always the chance of stumbling.

After dissecting the numbers and weighing the pros and cons, PDD Holdings emerges as the more enticing investment. With its stellar net profit margin, robust cash flow, favourable valuation, and minimal dilution concerns, PDD is like the underdog in a sports movie, poised for glory. Alibaba might be the old guard, but its lower profit margin and dilution issues make it a riskier bet.

So, if you’re looking to spice up your portfolio with a mix of growth and stability, PDD appears to be the stock to bet on. Think of Alibaba as the reliable old dog, while PDD is the energetic pup ready to fetch your returns. Just keep an eye on that pup—it’s got potential, but it’s also got a lot to prove.

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