Pinduoduo
I believe that Pinduoduo (NASDAQ:PDD) has been misunderstood by the market for the following reasons: (1) People are likely to mislabel Pinduoduo as the "Groupon of China". Groupon's (GRPN) lackluster public market performance could potentially have a negative impact on Pinduoduo. (2) An investor may underestimate the power of Tencent's (OTCPK:TCEHY) WeChat ecosystem. (3) People may also worry too much about the counterfeit issues on Pinduoduo's platform. (4) Despite having 385.5 million active buyers as of Q3 2018, Pinduoduo is still a young company with less than four years of history.
People's misunderstanding of WeChat's ecosystem is demonstrated by the big surprise of Apple's (AAPL) recent earnings revision. Apple CEO Tim Cook blamed the entire $9B revenue gap between current and previous guidance to weaker-than-expected sales in Greater China. Notwithstanding the Trade War impact, the fundamental reason that caused Apple's earnings shortfall is that iPhone users in China are not as sticky as those in other markets. On the contrary, Tencent's WeChat ecosystem is a much more powerful ecosystem in China. iPhone's retention rate is 86% in the rest of the world vs. 50% in China. Pinduoduo can be easily accessed via the mini-program in WeChat that people do not have to download the Pinduoduo app. Secondly, it is true that there may exist legal and regulatory risks towards the counterfeit products on Pinduoduo's platform, nonetheless, Alibaba (BABA) went through a similar journey a couple of years ago. An investor would have missed the complete big run of Alibaba if he or she had been worried too much about the counterfeit issues. I believe the factors laid out above explain why investors might have underestimated the long-term value of Pinduoduo.
User Growth & Annual Spending
Pinduoduo is the largest social e-commerce platform in China. Pinduoduo shoppers are able to instantly
