PDD Holdings stock price has done well this year, helped by the ongoing optimism about China and its strong revenue growth. It has jumped by over 26% this year, giving it a market cap of over $170 billion and making it the 11th biggest company in China. It is the fourth-biggest tech firm in the country after Tencent, Alibaba, and Xiaomi.
PDD is benefiting from China’s recovery
There are signs that the Chinese economy has bottomed, helped by the stimulus measures implemented by Beijing.
Recent data showed that China’s manufacturing and services PMIs have constantly remained above 50, a sign that they are expanding.
A report by the statistics agency showed that China’s economy hit its 5% target in 2024 as it surged by 5.4% a year earlier. Beijing has set a target to grow the economy by another 5% this year.
One approach that Xi Jinping is using is leaning on the technology sector to drive growth. Earlier this year, he held a meeting with tech leaders, including Jack Ma, the founder of Alibaba.
Wall Street analysts have taken note of this. Just this week, analysts at HSBC downgraded American stocks and recommended that investors should instead invest in China, where authorities are focused on growth.
Chinese tech companies have responded well. Alibaba stock price has soared, while the Hang Seng Tech index has soared.
Temu parent company is doing well
PDD Holdings, which owns brands like Pinduoduo and Temu, has become one of the best-performing companies in China in terms of revenue growth and profitability.
Its annual revenue has jumped from over $4.3 billion in 2019 to over $34 billion in 2023. Its trailing twelve-month revenue soared to over $53 billion, helped by Temu, the viral shoppin platform.
The most recent financial results showed that its revenue jumped by 44% in Q3 to $14.1 billion. This growth led to a 46% increase in its operating profit to $3.46 billion and a 61% increase in profit to $3.5 billion. Still, despite this growth, the management warned that it was facing intense competition and macro challenges.
PDD earnings ahead
The next key catalyst for the PDD Holdings stock price is its earnings, which will come out on Thursday next week.
Wall Street analysts believe that PDD’s revenue will come in at 115 billion CNY, a 30% increase from Q4 ’23. This revenue growth will lead to an annual figure of 398 billion CNY, a 60% from 2023. They expect that its annual revenue will get to $497.7 billion.
PDD has one of the strongest balance sheets, with over $43 billion in cash, no inventory, and just $737 million in debt.
The main risk that PDD Holdings faces is that Temu’s future is uncertain since other similar attempts to offer a similar solution have failed. There are signs that Temu’s business is slowing. Data by SimilarWeb shows that the total visits in February dropped by 8% to 990 million.
PDD Holdings stock price analysis
PDD chart by TradingView
The weekly chart shows that the PDD share price has remained in a tight range in the past few months. Connecting its highest swings since February 2021 and its lowest points since March 2022 shows that it has formed a symmetrical triangle pattern.
The PDD stock price is consolidating at the 50-week and 25-week Exponential Moving Averages (EMA). Also, the MACD and the Relative Strength Index (RSI) indicators have all pointed upwards.
The two lines of the triangle pattern are nearing their convergence point. Therefore, there is a likelihood that the stock will make a big move ahead. While it is still too early to predict, chances are that the PDD share price will have a strong bullish breakout. Such a move would see it rise to $165, the highest swing in 2024, which is about 35% above the current level.
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