Why Pinduoduo stock rose this morning

What happened

Shares of Pinduo-duo (PDD 19.99%) surged today after the Chinese e-commerce company posted strong results in its second-quarter earnings report, easily beating analysts’ expectations.

As of 9:46 a.m. ET on Monday, the stock was up 17.3%.

So what

The company, which differentiated itself with a mobile-only platform where shoppers group together with friends and family to get better prices on products, said revenue in the quarter rose 36% to 4 $.69 billion, well ahead of estimates of $3.49 billion.

The company, which has also become China’s largest online marketplace for agricultural products, saw strong sales during the June 18 shopping holiday, and operating profit jumped as the company controlled sales expenses. and marketing, its biggest operating expenses.

On an adjusted basis, operating profit more than tripled to $1.58 billion, partly due to delayed spending on some projects. Adjusted earnings per share jumped 165% to $1.13, smashing analyst consensus at $0.39.

Pinduoduo’s decision to waive commissions to traders selling agricultural products appears to have given the company a boost and helped it outperform its peers as Ali Baba and JD.comeach of which posted sluggish growth in the second quarter.

CEO Lei Chen said, “We saw a recovery in consumer confidence in the second quarter, especially during the [June 18]
shopping festival, reflecting the resilience of global consumption. The management also promised to continue investing in areas such as agriculture and research and development.

Now what

Pinduoduo did not provide guidance in the report, but investors should be encouraged by its momentum on both sides of the income statement, especially against steady-single-digit revenue growth from Alibaba and JD. .com. The news last week that the United States and China were close to reaching an agreement that could prevent the delisting of Chinese stocks from American stock exchanges also gave Chinese stocks a boost, and Pinduoduo is also planning international expansion. .

While Chinese e-commerce stocks have been dangerous territory for investors due to regulatory challenges, there’s a lot to like about Pinduoduo’s business right now, especially at the current share price.

Jeremy Bowman has positions in Alibaba Group Holding Ltd. and JD.com. The Motley Fool fills positions and recommends JD.com. The Motley Fool has a disclosure policy.

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