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Pinduoduo: Fastening Our Seatbelts Before The Takeoff

Jun. 04, 2021 12:40 AM ETPDD Holdings Inc. (PDD) StockBABA15 Comments


  • Pinduoduo's price has faced increased pressure lately along with the rest of its Chinese peers.
  • The company continues snowballing, with analyst estimates hardly reflecting its current growth trajectory.
  • The stock remains substantially undervalued even by utilizing prudent growth metrics.
  • We continue building our position by selling PUTs, therefore increasing our margin of safety and setting a lower average buying price before the stock's (eventual) takeoff towards its fair price.
  • This idea was discussed in more depth with members of my private investing community, Wheel of Fortune. Learn More »

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Chinese equities: The pressure remains

A little over a month ago, we chose Alibaba (BABA) as our top Consumer Discretionary pick moving forward into the year. Simply summed up, amongst the extended valuations in

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This article was written by

Nikolaos Sismanis profile picture

Nikolaos Sismanis holds a BSc in Banking and Finance and has over five years of experience as an equities analyst. He covers a variety of growth stocks and income stocks, including identifying those with the highest expected return potential, and a solid margin of safety.

He is a contributing author to the investing group Wheel of Fortune where they share actionable trading ideas across all asset-classes, sectors and industries. The goal of the service is to provide a one-stop-shop for investment and portfolio ideas, while educating the vibrant community of subscribers. Features of the service include: the Funds Macro Portfolio (only ETFs and CEFs) for less active investors, the Single Macro Portfolio (single equity focused) for more active investors, educational content, and a live chat room to openly discuss ideas with like-minded investors and The Fortune Teller. Learn more.

Analyst’s Disclosure: I am/we are long PDD, BABA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (15)

Cathy Wood profile picture
More like fasten your seatbelt cause this stock is going to fall off a cliff
And it did lol
Jion profile picture
Thank you for this analysis. The true value of these stocks often uncovers when their insiders make a low ball offer to take them private. An example is the also chinese on/offline retail seller SECO, they offer $3.27 to buy it while QD invested $100 million at $4.90 not to long ago. It trades even lower, at $2.50, so a 25% can be made there, but still the long term investors who bought higher will lose.
Askar Top profile picture
do u take into consideration impact on margin of yr short puts? triple digit high + high vol stock -> severe reduction in buying power? do u use IB? or tasty trade? checked yr tables... yr annual option yield formula does not include "Capital"....
gklemenc profile picture
Do you know how is P/S derived? It's from the profit margin. Companies like PDD that sell low-cost products, with discounts, and in large quantities, should have p/s around 1, even lower. Not 18 or whatnot. OMG.
psgros profile picture
What is your time frame on PDD?
The Fortune Teller profile picture
Looking up to 2 years ahad, but let's call it 2023 shall we?
As a euro who's never used PDD I'm curious what PDD's competitive advantage over BABA and JD is or what you think it's moat is? Could rivals with better economies of scale not try to replicate there business model? I'm interested but still skeptical as to whether it's going to be around long term.
Leandro_Santos profile picture
@AdNeMa Their competitive advantage is to sell products at a loss and giving huge discounts.
@Leandro_Santos not to mention the author makes a wild claim that 9x sales is a low valuation for PDD and they should trade at 18x sales 🤣

I mean that’s just so ridiculous, I stopped reading the rest of the article.
The Fortune Teller profile picture
1) It's not a "all or none" scenario. there's room for all of them
2) PDD, like JD, is backed by TCEHY, which (for itself) compete with BABA. It's more than (just) PDD trying to eat into BABA's market share.

3) www.wsj.com/...
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