$PDD Holdings Inc(PDD)$ has maintained a consistent ROE of over 10%, but given the overall environment for Chinese stocks, institutions are only willing to value it at 12x earnings. Despite this, the stock can still experience sudden drops, suggesting that a 10x multiple might be the true margin of safety.
The Q3 earnings are projected to reach 103.7 billion in revenue, which is only a 7% quarter-over-quarter growth compared to 40% during the same period last year. The market believes that PDD's high growth phase has ended, and user traffic has peaked, which may explain the low P/E. This earnings report is critical; if revenue falls short of expectations, the P/E could drop to 10x.
However, I am betting on an earnings beat, as I believe high growth isn’t over yet. With a 10x P/E, a net profit of $15 billion this year seems highly probable, and a market cap of $150 billion could provide a solid floor for the stock.
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