Core Insights - PDD Holdings reported strong financial growth in Q3 2024, with total revenues reaching RMB 99,354.4 million (US$ 14,157.9 million), a 44% increase year-over-year from RMB 68,840.4 million [2][5] - The company achieved an operating profit of RMB 24,292.5 million (US$ 3,461.6 million), marking a 46% increase from RMB 16,656.0 million in the same quarter of 2023 [2][9] - Net income attributable to ordinary shareholders was RMB 24,980.7 million (US$ 3,559.7 million), reflecting a 61% increase from RMB 15,537.1 million in Q3 2023 [3][10] Financial Performance - Total revenues for Q3 2024 were RMB 99,354.4 million (US$ 14,157.9 million), up 44% from RMB 68,840.4 million in Q3 2023, driven by increases in online marketing and transaction services [2][5] - Revenues from online marketing services were RMB 49,351.0 million (US$ 7,032.5 million), a 24% increase from RMB 39,687.7 million in the same quarter of 2023 [5][25] - Transaction services revenues surged to RMB 50,003.4 million (US$ 7,125.4 million), a 72% increase from RMB 29,152.7 million in Q3 2023 [6][25] Cost and Expenses - Total costs of revenues increased to RMB 39,709.2 million (US$ 5,658.5 million), a 48% rise from RMB 26,830.2 million in the same quarter of 2023, primarily due to higher fulfillment and payment processing fees [6][7] - Total operating expenses rose to RMB 35,352.7 million (US$ 5,037.7 million), a 39% increase from RMB 25,354.1 million in Q3 2023, largely driven by increased sales and marketing expenses [7][8] - Sales and marketing expenses were RMB 30,483.8 million (US$ 4,343.9 million), up 40% from RMB 21,748.5 million in the same quarter of 2023 [7][8] Profitability Metrics - Non-GAAP operating profit for Q3 2024 was RMB 26,770.5 million (US$ 3,814.8 million), a 48% increase from RMB 18,125.8 million in Q3 2023 [2][9] - Non-GAAP net income attributable to ordinary shareholders was RMB 27,458.7 million (US$ 3,912.8 million), also a 61% increase from RMB 17,027.1 million in the same quarter of 2023 [3][10] - Basic earnings per ADS were RMB 18.02 (US$ 2.57), compared to RMB 11.38 in Q3 2023, while diluted earnings per ADS were RMB 16.91 (US$ 2.41), up from RMB 10.60 [11][24] Cash Flow and Balance Sheet - Net cash generated from operating activities was RMB 27,522.3 million (US$ 3,921.9 million), down from RMB 32,537.9 million in Q3 2023 [11] - As of September 30, 2024, cash, cash equivalents, and short-term investments totaled RMB 308.5 billion (US$ 44.0 billion), up from RMB 217.2 billion as of December 31, 2023 [12] - Total assets increased to RMB 466.8 billion (US$ 66.5 billion) as of September 30, 2024, compared to RMB 348.1 billion as of December 31, 2023 [21][22]

Investment Rating - The report does not explicitly state an investment rating for the company [2]. Core Insights - The company, Pinduoduo (PDD.US), is expected to report total revenue of 101.6 billion yuan for Q3 2024, representing a year-on-year growth of 48% [2]. - Online marketing revenue is projected to be 49.5 billion yuan, up 25% year-on-year, while transaction service revenue is anticipated to reach 52.4 billion yuan, reflecting an 80% increase [2]. - Operating expenses are expected to total 35.1 billion yuan, a 38% increase year-on-year, with a cost structure that includes marketing expenses growing 36% to 29.6 billion yuan, management expenses rising 143% to 1.8 billion yuan, and R&D expenses increasing 27% to 4.3 billion yuan [2]. - The anticipated operating profit is 28.6 billion yuan, a 71% increase year-on-year, with a profit margin of 28% [2]. - For the full year 2024, total revenue is projected to be 423.6 billion yuan, a 71% year-on-year growth, with online marketing revenue expected to be 194.4 billion yuan (27% growth) and transaction service revenue at 229.2 billion yuan (144% growth) [2]. - The management has indicated that due to external environment and competitive landscape changes, high growth and profitability will face challenges, leading to increased investments without considering stock buybacks or dividend plans [2]. Summary by Sections Q3 2024 Performance Expectations - Total revenue is expected to be 101.6 billion yuan, with online marketing revenue at 49.5 billion yuan and transaction service revenue at 52.4 billion yuan [2]. - Operating expenses are projected at 35.1 billion yuan, with a significant increase in marketing and management expenses [2]. - Anticipated operating profit is 28.6 billion yuan, with a profit margin of 28% [2]. Full Year 2024 Projections - Total revenue for 2024 is expected to reach 423.6 billion yuan, with substantial growth in both online marketing and transaction service revenues [2]. - Operating profit is projected to be 125.4 billion yuan, reflecting a 114% year-on-year increase [2]. - The management's strategy includes increased investments to navigate market uncertainties and competition [2].

Core Viewpoint - PDD Holdings is expected to report strong third-quarter results, with significant revenue and earnings growth anticipated compared to the previous year [3][19]. Financial Performance - The Zacks Consensus Estimate for revenues in Q3 2024 is $14.47 billion, reflecting a 53.36% increase from the same quarter last year [3]. - The consensus estimate for earnings is $2.82 per share, indicating an 81.94% growth year-over-year, with a recent upward revision of 2.9% [3]. - PDD has a history of earnings surprises, with a 10.73% surprise in the last quarter and an average surprise of 41.14% over the last four quarters [4]. Strategic Initiatives - The company is focusing on agricultural digitization through its agriculture cloud initiative and partnerships, enhancing its competitive position in the agricultural e-commerce sector [6]. - PDD's investment in supply chain efficiencies and a RMB10 billion transaction fee reduction program aims to support high-quality merchants, driving platform improvements and increased adoption [7]. - Technological innovations in merchant onboarding and product listing processes are being implemented to balance scale and quality control, strengthening the company's market position [8]. Market Position and Consumer Trends - PDD's performance in Q2 2024, with an 86% year-over-year revenue increase to RMB97.1 billion, sets a strong foundation for Q3 [9]. - The company is adapting to changing consumer preferences towards experience-based consumption, which aligns with its platform capabilities [11]. - Despite facing competition from major players like Amazon, eBay, and Alibaba, PDD's strategic focus on long-term growth and innovation positions it favorably in the market [13]. Valuation and Investment Opportunity - PDD shares have underperformed in the year-to-date period, losing 19.6%, compared to the industry's decline of 6.8% and the S&P 500's growth of 24% [14]. - Currently, PDD is trading at a forward 12-month P/E of 8.94X, significantly lower than the industry's 15.35X, indicating a potential investment opportunity [17]. - The company's strong cash position of RMB284.9 billion supports its strategic initiatives and long-term growth plans [10][19].

Core Viewpoint - PDD Holdings Inc. has shown a recent downtrend in stock price, but the formation of a hammer chart pattern suggests a potential trend reversal, supported by rising optimism among analysts regarding future earnings [1]. Group 1: Technical Analysis - The stock has lost 5.4% over the past two weeks, but a hammer chart pattern formed in the last trading session indicates that bulls may be gaining support against bears [1]. - A hammer chart pattern signals a potential bottom in a downtrend, suggesting that selling pressure may be exhausting [2]. - The hammer pattern occurs when a stock opens lower, makes a new low, but then closes near or slightly above its opening price, indicating a possible loss of control by bears [2]. Group 2: Fundamental Analysis - There has been an upward trend in earnings estimate revisions for PDD, with a 1.3% increase in the consensus EPS estimate for the current year over the last 30 days, indicating analysts expect better earnings [3]. - PDD holds a Zacks Rank of 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks, which typically outperform the market [3]. - The Zacks Rank serves as a timing indicator, suggesting that the company's prospects are beginning to improve, reinforcing the potential for a turnaround [3].

Group 1 - PDD Holdings (NASDAQ: PDD) presents a strong value and growth opportunity with a two-year 37% enterprise value CAGR and a 43.5% margin of safety for investment based on the valuation model [1] - The macroeconomic conditions in China are expected to slow significantly, which may impact the company's performance [1] - The investment analyst Oliver Rodzianko specializes in the technology sector, focusing on AI, semiconductors, software, and renewable energy, emphasizing companies with resilient management and competitive advantages [1]

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]