To The Moon

🌟🌟🌟On Monday, $PDD Holdings Inc(PDD)$  share price plummeted by nearly 30% to USD 100.00 a share in afternoon trading.  This is its worst single day drop for PDD on record.  What happened?

PDD has just reported its Q2 24 earnings that fell short of Wall Street Analysts' expectations amidst intensifying competition. 

 PDD's revenue increased by 86% year over year to RMB 97.06 billion (USD 13.36 billion) from RMB 52.28 billion versus expectations of RMB 99.98 billion.

Adjusted net income increased by 125% year over year to RMB 34.43 billion (USD 4.74 billion) from RMB 15.27 billion versus expectations of RMB 30.10 billion.

Adjusted EPS increased to RMB 23.24 (USD 3.20) from RMB 10.47 versus expectations of RMB 20.52.

Even though the revenue miss was not good, I believe that the main reason for the stock plummeting was due to PDD's management's comments that the company faces many challenges ahead that will weigh on future growth driven by intensified competition and external challenges.   PDD's management also stated that the company's future intentions was to invest in the company, which would affect profitability.  

It is not surprising that given  PDD management's comments were somewhat negative, that its share price took a beating. 

Looking at PDD's latest earnings, I feel that it is actually rather good.  It grew its revenue by 86% year over year.  Its net income increased by 125% year over year.  But Wall Street Analysts have higher expectations of PDD and that is why its share price tanked. 

Is PDD a Buy after its share price dropped so much on Monday? 

PDD is a phenomenonal  company and is expected to continue growing its market share globally with its strategy of offering good value to consumers for their money. 

PDD has made significant strides expanding overseas through its Temu low cost shopping app.  Most recently it has expanded into Brazil in June this year.  Temu is already in Asia, Europe, North America, Africa and Australia. 

Temu's Brazilian website came online in June and represents its 70th website for a national market.  This follows its move in May last year in Mexico where it quickly became the most popular e commerce app in terms of monthly active users.  It had 19 million users by the end of May this year, more than 15.3 million for MercadoLibre and 4.8 million for Amazon. 

Temu is even posing a challenge to $Amazon.com(AMZN)$  taking away some of Amazon's business in the US.   A survey in April showed that 34% of the respondents shopped at least once a month on Temu, more than 29% for EBay.  However Amazon is still the market leader with 75% of the respondents shopping there at least once a month. 

PDD had even outpace its rival $Alibaba(BABA)$  as the most valuable Chinese ECommerce stock before this share price plunge.  However Alibaba has resumed its dominant position as the most valuable Chinese ECommerce stock with a valuation of almost USD 199 billion last Friday versus PDD at USD 186 billion. 

Despite Monday's share price drop, PDD is still rated as a Buy by Wall Street Analysts, with an average Target price of USD 204.17, an upside potential of 104%!

At the last closing price on Monday of USD 100, it is an awesome Buy to me! 

As Warren Buffett likes to say When there is Fear in the markets it is time to be greedy. 

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