PDD Holdings Inc. (PDD): A Bull Case Theory

Core Thesis - PDD Holdings Inc. is viewed positively due to strong Q2 2025 earnings, cost efficiency, and management's strategic agility, despite some caution regarding future margins [2][3][5] Financial Performance - In Q2 2025, PDD Holdings reported revenues of RMB 104 billion, meeting expectations, and earnings per share of RMB 22.1, which was 50% above consensus [2] - The earnings beat was attributed to a near doubling of interest income and lower-than-expected operating costs, following a significant margin collapse in Q1 [2] - Revenue from China's marketing services grew by 13%, while Transaction Services remained flat; however, Temu's GMV increased over 30% year-over-year [2] Market Response - Following the earnings report, PDD's stock initially surged by 10% but ended the day down 3%, reflecting a pattern of cautious management guidance impacting investor sentiment [3] - Management indicated that Q2 margins are not sustainable due to ongoing investments and subsidies, which may affect future profitability [3] Strategic Positioning - PDD's unconventional communication style has historically led to superior results compared to competitors, with a long-term focus and an EV/FCF below 10, making it attractively priced [4] - The company is perceived as agile in navigating a competitive e-commerce landscape, with investors viewing current pullbacks as opportunities to accumulate shares [4] Historical Context - Previous bullish coverage highlighted PDD's rapid growth and strong financials, with the stock appreciating approximately 33.84% since May 2025 [5] - The current analysis aligns with earlier perspectives, emphasizing the company's robust growth and strategic positioning in the e-commerce sector [5]