This E-Commerce Stock Looks Interesting
Given how hot the e-commerce industry has been, if there’s a fast-growing e-commerce company with hundreds of millions of users, you’d expect it to be a household name. And yet, few North Americans have heard of Pinduoduo Inc (NASDAQ:PDD).
The reason is twofold. First, Pinduoduo serves the Chinese market, so consumers in the Western world don’t hear much about it. Second, it’s a lot younger than the other players in China’s e-commerce industry.
Two Chinese e-commerce companies that many U.S. investors are familiar with are Alibaba Group Holding Ltd (NYSE:BABA) and JD.com Inc (NASDAQ:JD). These companies listed their shares on U.S. stock exchanges back in 2014.
Pinduoduo, on the other hand, was founded in 2015, and PDD stock only went public on the Nasdaq in July 2018. In other words, Pinduoduo Inc entered a market at a time when there were already big incumbents.
The neat part is, Pinduoduo has grown incredibly quickly.
Take a look at the following table. It shows the number of active buyers on Pinduoduo’s platform on a trailing 12-month basis.
|March 2019||443.3 Million|
|June 2019||483.2 Million|
|September 2019||536.3 Million|
|December 2019||585.2 Million|
|March 2020||628.1 Million|
|June 2020||638.2 Million|
|September 2020||731.3 Million|
|December 2020||788.4 Million|
|March 2021||823.8 Million|
(Source: “Pinduoduo 1Q 2021 Results,” Pinduoduo Inc, last accessed July 14, 2021.)
In other words, over the past two years, the number of Pinduoduo’s active buyers has grown by more than 85%.
The company’s growth story is even more impressive when you look at its monthly active users (MAUs), a metric often used to measure the performance of Internet companies.
In the first quarter of 2019, Pinduoduo had 289.7 million MAUs. By the first quarter of this year, the number had surged to 724.6 million, marking a total increase of more than 150%.
Moreover, consumers were spending more money on the platform. The annual spending per active Pinduoduo buyer in the 12-month period ended December 31, 2020 was RMB2,115.2 ($324.20), representing a 23% increase from the 12-month period ended December 31, 2019. (Source: “Pinduoduo Announces Fourth Quarter and Fiscal Year 2020 Unaudited Financial Results,” Pinduoduo Inc, March 17, 2021.)
Combining an expanding user base with higher spending from each user, it shouldn’t come as a surprise that the company’s financials were growing at a commendable pace.
In 2020, Pinduoduo’s gross merchandise volume (GMV) grew by 66% year-over-year to RMB1.7 trillion ($255.6 billion).
GMV represents the total value of all orders for products and services placed on an e-commerce platform, and is one of the most important performance measures for e-commerce companies.
Pinduoduo Inc’s revenue for the year totaled RMB59.5 billion ($9.1 billion), representing a 97% increase year-over-year. The impressive top-line growth was driven by an increase in revenues from online marketing services and merchandise sales.
Of course, given how the COVID-19 pandemic impacted physical retail and encouraged online shopping in 2020, one might think that last year’s strong result for the e-commerce platform was a one-off event. But moving into 2021, we see that Pinduoduo has actually been continuing its growth momentum.
In the first quarter of this year, the company generated RMB22.2 billion ($3.4 billion) in total revenue, up by 239% year-over-year. (Source: “Pinduoduo Announces First Quarter 2021 Unaudited Financial Results,” Pinduoduo Inc, May 26, 2201.)
As mentioned earlier, Pinduoduo’s average MAU reached 724.6 million in the first quarter of 2021. Well, that number is up by 49% from the first quarter of 2020.
At the bottom line, the company reported an adjusted net loss of RMB1.52 ($0.23) per American Depositary Share (ADS), which was substantially narrower than its adjusted net loss of RMB2.73 per ADS in the year-ago period.
Pinduoduo Inc (NASDAQ:PDD) Stock Chart
Chart courtesy of StockCharts.com
As you might expect, Pinduoduo stock enjoyed a huge rally in 2020. In more recent months, though, sentiment seems to have changed. PDD stock has pulled back by nearly $100.00 per share since reaching a high of $212.60 in February.
Because Pinduoduo Inc remains a solid e-commerce play, the recent retracement in its share price could represent an opportunity.