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Pinduoduo: Cash & Innovation Machine In Hyper Growth Mode

Jun. 07, 2021 5:24 AM ETPDD Holdings Inc. (PDD)11 Comments
Zen Analyst profile picture
Zen Analyst


  • PDD a leading e-commerce platform in China that is still growing like a weed and generating a ton of cash doing it.
  • The company enjoys many competitive advantages over competitors, driven by innovation.
  • Following the recent growth sell-off, the stock is trading at an attractive valuation.
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Pinduoduo (NASDAQ:PDD) is a force of nature that I needed to understand, and I am here to share with you what I have learned about this magnificent organization.

In only five years, the company went from nothing to the largest e-commerce

This article was written by

Zen Analyst profile picture
I am a seasoned investor providing investment analysis on SeekingAlpha and much more on Substack. Your support is vital in helping me continue my journey as an independent writer.  I encourage you to subscribe to my Substack newsletter, The Compounders. The newsletter is accessible to everyone, with a free tier providing a wealth of valuable insights. I look forward to interacting with you on The Compounders!  https://zenanalyst.substack.com/

Analyst’s Disclosure: I am/we are long BABA, TCEHY. 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.

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Comments (11)

How will WeChat clamp down by CCP affect PDD?
climbthemountain profile picture
Baillie Gifford owns 3.5 billion worth of PDD shares as of March 31st. I'll side with them.
@climbthemountain do you think it’s a Buy at current levels? Thank you
After the Luckin Coffee disaster, I got cold feet with PDD's creative accounting methods. I'm still not as comfortable with PDD as I am with BABA, TCEHY, and JD.
Great article about PDD. Thanks for explaining the 'team buying' concept. It's so interesting that buyers have to wait 24 hours for their team to form - very different from the instant gratification that US ecommerce companies are striving for.
Beware all readers, PDD is not, has never been, and probably wont ever be a "cash machine" so long as BABA and JD are creating a price war. PDD is financing their business through payables which shows as a change in NWC and is giving a false impression of being a "cash machine". Payables will eventually have to be paid down from real ops cash flow and will keep PDD's balance sheet comparably weak for a long long time. Financing through payables is a sign of a weak business and in no way shape of form does that translate to PDD having a good balance sheet. I recommend you look into JD and BABA and seriously reconsider your position... they're the real cash machines who are paying down payables and shoring up their balance sheets.... they're the leaders in the space by 10-15 years. PDD will go down to 50s by 2023-2024 latest, you can bookmark this.
Zen Analyst profile picture
@Jose M 17 If you read the article, I already explained the NWC driven FCF, and explained the risks. Also as disclosed, I'm long BABA.
Pierre Rossouw profile picture
@Jose M 17 Maybe not.
BUT big demand and growth are there. Undoubtedly.
Who knows the future?
@Jose M 17 Hit my $50 price target much quicker than anticipated! BABA looks cheap, JD looks like the winner, PDD should still be treated as uninvestable.
Thank you for the explanations of what makes PDD unique. You have no position in PDD?
Zen Analyst profile picture
@nfichter I'm still digging deeper but the real reason I don't have a starter position is that I'm fully allocated with no tax lot to harvest losses and I already wrote the IRS a big check last quarter -- it hurts a lot... Too much info but I want to be 100% transparent with my readers. I will likely start building a starter position soon though using dividend cash flow.
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