Goldman Sachs Upgrades Pinduoduo On Normalizing China Internet Trends

Pinduoduo Inc’s PDD gross merchandise value growth is likely to reaccelerate in the third quarter to 69% year-on-year, reaching 421 billion yuan ($63 billion), according to Goldman Sachs.

The Pinduoduo Analyst: Piyush Mubayi upgraded Pinduoduo from Neutral to Buy and raised the price target from $73.10 to $123.

The Pinduoduo Thesis: Looking at China’s internet trends in the third quarter, a sequential revenue recovery is likely in advertising, local services and cloud services, while a slowdown can be expected in e-commerce, gaming and entertainment, Mubayi said in the Tuesday upgrade note.

Pinduoduo’s GMV and user metrics are likely to have improved, driven by “our expectation that LTM (last 12 months) active buyers will steadily increase by 35mn qoq to 718mn, exceeding 700mn for the first time,” the analyst said.

This will further narrow the gap with Alibaba Group Holding Ltd BABA, he said. 

Pinduoduo has shown meaningful improvement in user engagement trends, with Pinduoduo’s time spent share among major e-commerce platforms rising to 41% and its daily average users remaining higher than Alibaba and JD.com, Mubayi said.

The company’s average daily sessions have increased steadily, the analyst said. 

PDD Share Price: Shares of Pinduoduo were up 6.41% at $97.49 at last check Tuesday. 

Courtesy photo.