To The Moon

$PDD Holdings Inc(PDD)$ 

Commentary on Pinduoduo's Latest Financial Report

Pinduoduo has released its third-quarter earnings report, showcasing significant growth in revenue and net profit. However, both figures fell short of market expectations. True to its commitment to supporting merchants, the company saw its gross profit margin drop by 5% and its operating margin by 9%. This is shaping up to be another tough night for investors.  

With total assets of ¥466.7 billion, including over ¥300 billion in cash and just ¥800 million in fixed assets, Pinduoduo presents an unusually lean and clean balance sheet, free of excessive investments or complications. Despite maintaining a strong growth trajectory, missing market expectations highlights the cost of ramping up investments and subsidies for merchants, as emphasized by the management during the earnings call.  

The leadership repeatedly stressed their focus on compliance, governance, and high-quality support for merchants, underscoring the company's commitment to social responsibility. The message is clear: Pinduoduo is willing to sacrifice short-term profitability to ease the burden on merchants and prioritize long-term stability—an approach that reflects the unique dynamics of doing business in China.  

Competitive Landscape  

Pinduoduo operates in a fiercely competitive environment. Domestically, it goes head-to-head with giants like Alibaba, JD.com, Douyin (TikTok China), Meituan, and Kuaishou. Globally, it contends with platforms like SHEIN, AliExpress, and Amazon. Facing such formidable competitors and navigating regulatory scrutiny in multiple jurisdictions, Pinduoduo continues to hold its ground, expanding market share on both fronts with apparent ease.  

Impressively, the company accomplishes all this with a workforce of fewer than 20,000—a mere 10% of its peers' employee numbers. This elite, streamlined team operates under a flat management structure that minimizes bureaucracy, reduces costs, and boosts efficiency.  

Domestically, Pinduoduo focuses on just two core businesses: e-commerce and grocery delivery. It has no sprawling investments, no new business incubators, and not even its own office building—an extremely focused strategy that starkly contrasts with the diversification seen in other tech giants.  

Public Perception and Challenges  

Opinions about Pinduoduo are polarized. Merchants have a love-hate relationship with the platform, while consumers feel similarly conflicted. Recently, whistleblower Wang Hai purchased 10 brands of peanut oil from Pinduoduo, claiming that all tested samples were counterfeit. A joke circulating online encapsulates this issue: “Where can you buy Maotai for ¥100 a bottle? Pinduoduo! They’ll even honor their ‘10 times compensation for fakes’ promise—by sending you 11 bottles of counterfeit Maotai.”  

Negative sentiment from public discourse and high-end merchants remains a challenge. Management has admitted to past missteps and inertia in their strategic thinking, signaling a willingness to course-correct. This humility, coupled with their focus on improvement, may position Pinduoduo as one of the most resilient players in the e-commerce space—a stark contrast to platforms that only deliver good news without acknowledging flaws.  

Investor Sentiments  

Investors, too, have mixed feelings. Some believe Pinduoduo's practices disrupt the market by driving down profits and damaging healthy competition, likening it to a "race to the bottom" that could harm all players in the long term. Others view the company's low P/E ratio—just 10x, even by traditional industry standards—as an undervaluation, especially for a tech-driven business.  

Market expectations for Pinduoduo are high, and even minor underperformance leads to sharp sell-offs. The looming threat of U.S. tariffs adds another layer of uncertainty.  

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