To The Moon

Earnings That Refuse to Miss a Beat

I have to start with the obvious: PDD continues to outmanoeuvre expectations. In its most recent quarter, the company posted revenue of 104 billion yuan and adjusted earnings of 22.07 yuan per ADS, comfortably above forecasts. The share price has not been immune to short-term volatility—trading between $123 and $132 this week and down around 3.3% on the day—but the earnings momentum remains firm. For 2025 so far, PDD’s stock has returned 29.17%, easily outstripping the MSCI World’s 14.53%. To me, that performance gap is not just a stroke of luck; it reflects a business that has grown too big and too competitive to ignore.

PDD’s 29.17% YTD return significantly outpaces MSCI’s 14.53% gain.

What stands out, though, is how $PDD Holdings Inc(PDD)$ has managed this feat while tolerating narrower margins. Net income growth dipped slightly by nearly 4% year-on-year, yet operating margin still sits at a healthy 24.8%, with profit margins close to 24%. The company is effectively signalling that it is prepared to absorb near-term cost pressures in exchange for market share and long-run durability. Analysts appear to view this willingness as a strategic rather than reckless trade-off—and that likely explains why the Street maintains its Buy stance.

A Long Game of Merchant Loyalty and Global Ambition

I often remind myself that e-commerce giants live or die by their ecosystems. PDD has been quietly but deliberately investing in merchant incentives, logistics, and platform quality. This might sound mundane, but it is crucial: merchants tend to stay loyal to platforms that provide predictable traffic, cheaper logistics, and stronger margins. In that sense, PDD is less about chasing flashy advertising and more about embedding itself in the economic lives of both sellers and buyers.

Then there’s Temu—the company’s international weapon. While many investors already know it has been climbing app download charts in the US and Europe, fewer realise just how capital-efficient PDD’s global push has been. With over 380 billion yuan in cash reserves and only 11 billion yuan in debt, the balance sheet is unusually strong for a company waging a global e-commerce war. This financial cushion allows PDD to sustain loss-leading expansion campaigns far longer than many rivals would dare. Analysts seem to interpret this as disciplined spending power rather than wasteful aggression, which supports the consensus rating.

The competitive angle here is fascinating. Alibaba has struggled to maintain overseas traction, and JD.com has been slower to globalise, while PDD’s Temu has built brand recognition almost overnight in markets traditionally resistant to Chinese platforms. This ability to scale cheaply and rapidly outside its home market is, in my view, an underappreciated edge that analysts factor into their optimistic outlook.

PDD accelerates while rivals struggle to match the pace

Valuation That Refuses to Stretch Too Far

Now, valuation is where things become interesting. With a trailing P/E ratio of 13.9 and a forward multiple of about 14, PDD is priced closer to a traditional value stock than a high-growth disrupter. Compare that with US tech peers trading anywhere from 25 to 40 times earnings, and you see why analysts remain confident in their Buy ratings. The PEG ratio of 1.59 suggests investors are paying a modest premium for expected growth, not an irrational one.

What I also notice is the company’s capital efficiency. Return on equity sits at a blistering 31.8%, far above global peers. Cash flow paints an equally compelling picture: PDD generated over 94 billion yuan in operating cash flow and nearly 80 billion yuan in free cash flow over the trailing twelve months. These aren’t the figures of a company scraping by; they suggest a business that is already a cash machine but still priced as though it might stumble. It is no wonder the Street appears reluctant to downgrade PDD, even when margin pressure creeps into the numbers.

Looking closer at the stock itself, the chart shows PDD riding the upper band with conviction.

Strong YTD breakout as PDD trades at the top of its range, signalling bullish momentum

There is, of course, competitive risk. PDD remains in a fierce domestic battle with $Alibaba(BABA)$ and $JD.com(JD)$, and tariffs in foreign markets could yet test Temu’s ambitions. But it is precisely this resilience—growing 7% year-on-year in revenue despite trade frictions—that gives me confidence that analysts’ optimism is not misplaced. PDD is not a speculative hope story; it is already entrenched, profitable, and expanding.

What Investors Might Not Realise

One lesser-known insight is that institutional ownership remains relatively modest at just over 32%. This leaves significant room for larger funds to increase positions if conviction grows, which could provide a powerful demand tailwind. Another overlooked point is just how conservative PDD’s debt profile is. A debt-to-equity ratio of barely 3% is almost unheard of in an industry that often leans heavily on leverage. This means PDD has the flexibility to outspend rivals in downturns while others tighten belts—something analysts likely see as another justification for their Buy calls.

Verdict: Buy Still Makes Sense

So, why does the Buy consensus persist? Because $PDD Holdings Inc(PDD)$ combines the unusual trio of growth, profitability, and balance sheet strength, all at a valuation that would make a bargain hunter blush. Yes, margins are under pressure and competitive risks loom, but those are features of any major e-commerce player. The difference here is that PDD has the resources, strategy, and resilience to handle them.

In my view, PDD remains one of the most compelling e-commerce stories globally. With analysts’ average price target around $140, the stock offers upside potential from current levels, underpinned by operational execution and international scaling. The market may fret over tariffs or rising costs, but the fundamentals suggest a company that is still in control of its destiny. For now, I am inclined to keep the Buy badge firmly pinned on PDD’s lapel—though, knowing Temu’s love of discounts, perhaps I should call it a ‘Buy One, Get Growth Free’ opportunity.

From carts to rockets: Temu’s global lift-off continues

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