Why This Pinduoduo Analyst Is Bullish On Chinese E-Commerce Platform

Merchant checks suggest Pinduoduo Inc PDD is poised to close its average revenue per user gap with the leading Chinese e-commerce platforms, according to Oppenheimer.

The Pinduoduo Analyst: Bo Pei initiated coverage of Pinduoduo with an Outperform rating and $100 price target.

The Pinduoduo Thesis: The company achieved 68% year-on-year growth in gross merchandise value in the first half of 2020, Pei said in the initiation note.

This was significantly faster than the 20% growth achieved by Alibaba Group Holding Ltd BABA and JD.Com Inc's JD 25%, the two leading e-commerce platforms in China, the analyst said.

Oppenheimer expects Pinduoduo to close its ARPU gap with Alibaba and JD.com “by leveraging its large and active buyer base,” he said. “Despite having 683M active buyers, average spending on PDD is only one-fifth BABA's and a third of JD's,” Pei said. 

"We believe PDD is on the right track to expand product supplies by offering merchants a large consumer base and attractive ROI. We expect GMV/buyer to reach one-third of BABA's in '22E."

PDD Price Action: Pinduoduo shares were trading 7.31% higher at $90.30 at last check Tuesday.

Photo courtesy of Pinduoduo.