Core Viewpoint - PDD Holdings Inc. is set to announce its unaudited financial results for Q3 2024 on November 21, 2024, before U.S. markets open [1] Group 1 - The earnings conference call will take place at 7:30 AM ET on November 21, 2024 [1] - The conference call will be available for live webcast and replay on the company's investor website [2] Group 2 - PDD Holdings is a multinational commerce group that operates a portfolio of businesses aimed at integrating more businesses and individuals into the digital economy [3] - The company's mission focuses on enhancing productivity and creating new opportunities for local communities and small businesses [3]

Company Performance - PDD Holdings Inc. Sponsored ADR closed at $113.41, reflecting a -0.34% change from the previous trading day's closing, underperforming the S&P 500 which gained 0.02% [1] - The company's shares experienced an 11.24% loss over the previous month, compared to the Conglomerates sector's loss of 8.03% and the S&P 500's gain of 2.99% [1] Earnings Projections - The upcoming EPS for PDD is projected at $2.82, indicating an 81.94% increase year-over-year [2] - Revenue is estimated to be $14.47 billion, representing a 53.36% increase compared to the same quarter of the previous year [2] - Full-year estimates predict earnings of $12.01 per share and revenue of $56.47 billion, reflecting year-over-year changes of +83.08% and +62.99% respectively [3] Analyst Sentiment - Recent changes to analyst estimates for PDD indicate optimism regarding the company's business and profitability [4] - The Zacks Rank system currently rates PDD Holdings Inc. as 2 (Buy), with a 1.31% rise in the Zacks Consensus EPS estimate over the past month [6] Valuation Metrics - PDD is currently traded at a Forward P/E ratio of 9.47, which is a discount compared to the industry's average Forward P/E of 17.35 [7] - The PEG ratio for PDD is 0.26, significantly lower than the Diversified Operations industry's average PEG ratio of 1.95 [7] Industry Context - The Diversified Operations industry, part of the Conglomerates sector, has a Zacks Industry Rank of 72, placing it in the top 29% of over 250 industries [8] - Research indicates that the top 50% rated industries outperform the bottom half by a factor of 2 to 1 [8]

Core Viewpoint - PDD Holdings Inc. is experiencing significant selling pressure, with a 13.9% decline over the past four weeks, but is now positioned for a potential trend reversal as it enters oversold territory, supported by analysts predicting better-than-expected earnings [1]. Group 1: Stock Performance and Indicators - PDD's stock has declined 13.9% in the last four weeks, indicating substantial selling pressure [1]. - The stock's Relative Strength Index (RSI) is at 29.39, suggesting it is in oversold territory and may soon experience a trend reversal [3]. - An RSI reading below 30 typically indicates that a stock is oversold, which can signal potential entry opportunities for investors [2]. Group 2: Earnings Estimates and Analyst Consensus - There is strong agreement among sell-side analysts to raise earnings estimates for PDD, with a 1.3% increase in the consensus EPS estimate over the last 30 days [3]. - An upward trend in earnings estimate revisions is generally associated with price appreciation in the near term [3]. - PDD currently holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimate trends and EPS surprises [3].

Core Viewpoint - The Zacks Diversified Operations industry is expected to benefit from growth in aerospace, defense, and oil & gas sectors, driven by strong demand in commercial aviation and medical markets, alongside infrastructure development and technological advancements [1][4]. Industry Overview - The Zacks Diversified Operations industry encompasses companies across various sectors, including oil and gas, industrial, electronics, aviation, and healthcare, providing equipment and solutions such as gas turbines, commercial jet engines, and bioprocessing products [3]. - Industry players also offer services in agriculture, marine, and telecommunications, with a significant global presence in markets like the U.S., Japan, India, and China [4]. Major Trends - **Strength in Aerospace & Defense Markets**: The industry benefits from strong demand in defense and governmental sectors, increased oil and gas exploration, and infrastructure development, with commercial aviation markets showing healthy growth [4]. - **Investments in Innovation & Technological Advancements**: Continuous focus on innovation and digitization is expected to enhance operational productivity and product quality, driving growth in the industry [5]. - **Weakness in the Manufacturing Sector**: The manufacturing sector is experiencing persistent weakness, with the Manufacturing Purchasing Manager's Index at 46.5% in October, indicating contraction [6][7]. - **Supply-Chain Disruptions**: Ongoing supply-chain issues, particularly regarding electrical and electronic components, are a concern for industry participants, as reflected in slower deliveries [8]. Industry Performance - The Zacks Diversified Operations industry holds a Zacks Industry Rank of 61, placing it in the top 24% of over 250 Zacks industries, indicating strong prospects [9][10]. - The industry's earnings estimates for the current year have increased by 14.4% over the past year, reflecting positive sentiment among analysts [11]. - Over the past year, the industry has underperformed the S&P 500, rising 13.7% compared to the S&P 500's 36.6% growth [13]. Current Valuation - The industry is currently trading at a forward P/E of 15.42X, compared to the S&P 500's 22.43X, with historical trading ranges between 15.42X and 38.15X over the past five years [14]. Notable Stocks - **PDD Holdings**: This multinational commerce group is benefiting from its strong e-commerce business model, with a 16.2% increase in shares over the past year and a 0.5% upward revision in 2024 earnings estimates [15][16]. - **Federal Signal**: This company is well-positioned to benefit from robust aftermarket demand and has seen a 38.9% increase in shares over the past year, with a 1.2% upward revision in 2024 earnings estimates [17][18].

Investment Rating - The report downgrades Pinduoduo (PDD US) to a **Neutral** rating, with a current price of US$122.15 and a target price of US$130.00 [1][5] Core Views - Pinduoduo's domestic business remains robust, with Q3 2024 revenue expected to exceed Bloomberg consensus estimates by 1.8%, reaching RMB 104.4 billion, driven by a 51.6% YoY growth [7] - Adjusted net profit for Q3 2024 is projected at RMB 31.3 billion, 7.2% above consensus, with a net profit margin of 30% [7] - Despite strong performance, mid-to-long-term stock price pressure is expected due to unresolved geopolitical risks, particularly US tariff policies affecting TEMU [7][18] - The report assigns a 25% discount to TEMU's valuation, reflecting market concerns over potential tariff impacts, leading to a revised target price of US$130 [18] Financial Performance - Revenue for 2024E is forecasted at RMB 414.07 billion, a 67% YoY increase, with net profit expected to grow 88% YoY to RMB 127.7 billion [4] - Gross profit margin (GPM) is projected to stabilize at 63.6% in 2024E, slightly up from 63.0% in 2023A [4] - ROE is expected to decline from 72.2% in 2023A to 50.8% in 2024E, reflecting higher equity base and operational challenges [4] - P/E ratio is estimated at 10x for 2024E, down from 19x in 2023A, indicating a more attractive valuation [4] Geopolitical Risks - Trump's potential tariff policies, including a 10% universal tariff and a 60% tariff on Chinese goods, could severely impact TEMU's price competitiveness and profitability [11][12] - TEMU may face challenges in passing tariff costs to consumers or merchants, potentially eroding its price advantage and squeezing margins [12] - Biden's proposed reforms to the 1974 Trade Act, including adjustments to the $800 de minimis threshold, are unlikely to significantly affect TEMU [14][15] Valuation and Market Sentiment - Pinduoduo's core platform business is valued at 12x 2024E PER, based on a projected GMV of RMB 4.9 trillion and operating profit of RMB 141.5 billion [18] - Despite a market cap of US$169.64 billion, representing a 10x 2024E valuation, the stock is considered one of the most cost-effective options in China's e-commerce sector [18] - Market sentiment remains fragile, with geopolitical risks overshadowing strong domestic performance, leading to a downgrade to Neutral [18]

Company Overview - PDD Holdings, founded by Colin Huang, experienced a significant drop in share price, nearly 30% in one day, due to investor concerns over slower profit growth forecasts [2] - Despite the drop, shares have since recovered amid a broader stock rally in China, positioning Huang at No. 4 among China's richest with a net worth of $43.9 billion [2] Financial Performance - In Q2 2024, PDD reported a 144% increase in net income to 32 billion yuan ($4.5 billion), although this was lower than the previous quarter's more than threefold increase [3] - The company indicated that future earnings would be impacted by increased investments in its supply chain and a 10 billion yuan reduction in fees charged to vendors [3] Market Position and Competition - PDD's Pinduoduo app remains popular among Chinese consumers seeking discounted products, such as $13 winter coats [4] - The company faces intense competition from rivals Alibaba and JD.com, and is encountering challenges in expanding internationally with its Temu app [4] - Indonesian authorities have requested Apple and Google to block the Temu app from their app stores due to concerns over low-cost goods, although PDD asserts that Temu complies with local laws [4]

Core Viewpoint - Growth stocks are appealing due to their potential for above-average financial growth, but identifying strong growth stocks can be challenging due to associated risks and volatility [1] Group 1: Company Overview - PDD Holdings Inc. Sponsored ADR is highlighted as a recommended growth stock based on the Zacks Growth Style Score, which evaluates a company's real growth prospects beyond traditional metrics [2] - The company has a favorable Growth Score and a top Zacks Rank, indicating strong potential for performance [2][10] Group 2: Earnings Growth - PDD Holdings Inc. has a historical EPS growth rate of 290.2%, with projected EPS growth of 83.1% for the current year, significantly outperforming the industry average of 11.1% [5] Group 3: Cash Flow Growth - The year-over-year cash flow growth for PDD Holdings Inc. is 76.3%, which is substantially higher than the industry average of -7.7% [6] - The company's annualized cash flow growth rate over the past 3-5 years is 52.5%, compared to the industry average of 9.7% [7] Group 4: Earnings Estimate Revisions - There have been upward revisions in current-year earnings estimates for PDD Holdings Inc., with the Zacks Consensus Estimate increasing by 1.3% over the past month [9] - Positive trends in earnings estimate revisions correlate strongly with near-term stock price movements, further validating the company's growth potential [8] Group 5: Investment Conclusion - PDD Holdings Inc. has achieved a Growth Score of A and a Zacks Rank of 2, indicating it is a solid choice for growth investors and a potential outperformer [10][11]

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Group 1 - PDD Holdings is experiencing growing attraction for brands, which is expected to enhance its stickiness over time [1] - The developments are likely to drive higher domestic GMV share growth for PDD Holdings [1] - PDD Holdings aims to maintain its high take rate amidst these changes [1] Group 2 - Astrada Advisors provides actionable recommendations to enhance portfolio performance and uncover alpha opportunities [2] - The firm has a strong track record in investment research across technology, media, internet, and consumer sectors in North America and Asia [2] - Astrada Advisors integrates rigorous fundamental analysis with data-driven insights to offer a nuanced understanding of key trends and competitive landscapes [2]