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Why Pinduoduo Stock Jumped Today

By Jeremy Bowman – Apr 20, 2020 at 4:45PM

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Shares of the Chinese online retailer popped after it announced a strategic investment.

What happened

Shares of Pinduoduo (PDD -1.38%) were moving higher today after the Chinese social commerce company got an analyst upgrade and made an investment in a brick-and-mortar retailer.

As a result, the stock finished the session up 12.7%.

A woman holding a box and talking on the phone

Image source: Getty Images.

So what

This morning, Credit Suisse upgraded Pinduoduo to neutral with a price target of $52.50. The news followed a surprising move over the weekend by the e-commerce company as it formed a strategic partnership with GOME retail group and acquired $200 million in convertible bonds in the company, worth 5.6% of the retailer.

GOME owns an extensive network of household-appliance-and-electronics stores across China, and Pinduoduo will now sell GOME's full product line on its platform, including brands such as Siemens and Sony, giving GOME access to Pinduoduo's 585 million users. The move marks Pinduoduo's first strategic investment, a common practice in China, and follows a $1.1 billion share offering in March, which the company had said was to enhance the user experience. 

David Liu, Pinduoduo vice president of strategy said of the move:

This strategic partnership is a win-win-win. Consumers win because they get a wider range of top domestic and international brands at competitive prices, GOME wins because they can broaden their access to our 585.2 million users, and PDD wins because we enhance our foothold in household appliances and electronics. 

Now what

Chinese stocks have offered investors a calm port in the storm of the coronavirus pandemic as China has brought its outbreak under control and businesses are returning to normal operations. Pinduoduo shares have surged during the U.S. market crash as the stock has jumped 44% since February 21, while the S&P 500 is down 15% in that time.

With Pinduoduo's gross merchandise value on the platform up to $144.6 billion last year, revenue surging 130% in 2019, and the new partnership with GOME adding opportunity, Pinduoduo shares could see more growth ahead.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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