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How Much Can PDD Grow?

|Includes:, Inc. (JD), PDD

Growth rates were used to project PDD’s revenue in 3 years.

Limiting factors were applied to projection.

Compared projected revenue to rival JD.

The most appealing story of PDD (Pinduoduo) is its growth rate. On its 2018 Q3 earning report conference, PDD showed strong Gross Merchandise Value (GMV) growth at the speed of 386% when the Last-Twelve-Month GMV was compared to that of same time in last year (


Quarterly revenue growth was more spectacular, at the rate of almost 700% (

Rev YoY

Likewise, triple-digit growth in active buyers, annual spending per active buyer, and Monthly Active Users (MAUs) (


Numbers are beautiful. Definitely it’s a great investment opportunity. Think about this, with the given YoY growth rates shown above, PDD will be a gigantic e-commerce company in a few years. Math always tells the truth and that’s why I like math. I used the numbers and did some calculations, as shown below:

Calculation 1

Basically, I applied YoY growth rates of both MAUs and “annual spending per active buyers”, respectively, in order to get projected values of 2019Q3 LTM, 2020Q3 LTM, etc. For example: 231.7*(226%+1)=755.3 for projected MAUs of 2019Q3; 294.4*(99%+1)=1779.9 for projected “annual spending per active buyers” of 2019Q3.

Because PDD also did a fantastic job of improving the monetization rate, I think it would be fair to give them a 30% YoY growth rate. I'm sure PDD management can do it although it would extremely difficult for any other e-commerce platforms. In another word, as of 2019Q3, they would like to have 2.5%*(30%+1)=3.25% monetization rate (round up to 3.3%). Please be noted, “projected annual revenue from active buyers”, which is the production of “projected annual GMV from active buyers” times “monetization rate”

From above calculations, I can tell PDD will be a company with multi-trillion Yuan of sales in 3 years, 3107.7 billion RMB Yuan to be exact. PDD got to be a must-buy stock! All is because it grows so fast, because China is a huge market with huge population. There are 1.4 billion people there! (Source:

Wait, only 1.4 billion? I have to make a small change since 1.4 billion would be the maximum of MAUs.

Calculation 2 What, children usually don’t shop, online or offline? Okay, I’m going to make another small change and take only about 1 billion adults (Source:

Calculation 3

Still, annual revenue of 387.1 billion RMB Yuan is an amazing number. Let’s check how amazing it is by comparing it to one of its e-commerce rivals, JD. As of 2018Q3, JD's LTM revenue was roughly 437.4 billion Yuan, as shown its press release. Announces Fourth Quarter and Full Year 2017 Results Announces Third Quarter 2018 Results

Note, I added revenue of 110.2 billion RMB Yuan for 2017Q4 to revenue of 427.2 billion Yuan for the 9 months ended September 30, 2018 to get the LTM revenue of 437.4.

In another word, assuming PDD will grow at its fantastic growth rates, IN THREE YEARS, it will be roughly the 88.5% of TODAY’s JD, in term of annual revenue.

As of February 15, 2019, the market cap of PDD is 30.66 billion US dollars, roughly 88.5% of that of JD, 34.66 billion US dollars. One of them got to be wrong...

Data by YCharts

Hold on! Children do not shop, do husbands/dads? Yeah, maybe, at least sometimes, particularly when wives/moms are busy. That's right, usually there is only one active shopper in a household. According to wikipedia, there are 455.9 million households in China (Source: Let me make the change accordingly.

Calculation 4 Okay, assuming PDD will grow at its fantastic growth rates, IN THREE YEARS, it will be roughly 40.4% of TODAY’s JD, in term of annual revenue, while PDD values 88.5% of JD TODAY. One of them got to be mis-priced.

Which one? You tell me. Uh-oh, I should’ve been short PDD!

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.