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Why Pinduoduo Stock Popped Today

By Evan Niu, CFA - Jan 25, 2021 at 12:25PM

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Bernstein initiates coverage on the Chinese e-commerce company with an outperform rating.

What happened

Shares of Pinduoduo (PDD -0.07%) popped as much as 14% today after getting a bullish initiation from Wall Street. Bernstein commenced coverage of Pinduoduo with an outperform rating and assigned a price target of $210, which represents 22% upside from Friday's closing price. As of 11:10 a.m. EST, the stock had pulled back and was up 6%.

So what

Analyst Robin Zhu is optimistic that the Chinese e-commerce technology company can continue to beat out its brick-and-mortar rivals that primarily operate offline, thanks to its deep pockets and the copious amount of user data that it has collected.

Green stock chart going up

Image source: Getty Images.

"Armed with generous access to capital, massive troves of data, and access to consumers via push notifications, our companies have long track records of creating new markets," the analyst wrote in a research note to investors. "We expect them to continue to out-compete and out-spend offline rivals, and project strong growth across most key end markets."

Now what

E-commerce is expected to be among the most intensely competitive area for Chinese tech companies, as gross merchandise value (GMV) in China is forecast to grow at a compound annual growth rate (CAGR) of 17.8% over the next five years. Pinduoduo will be competing to steal share from dominant e-commerce giant Alibaba. Consumers are also expected to start buying more groceries online.

Pinduoduo has been enjoying strong growth, with revenue in the third quarter jumping by 89%. The company now has 731 million active buyers on its platform.

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Stocks Mentioned

Pinduoduo Stock Quote
$40.13 (-0.07%) $0.03
Alibaba Group Holding Limited Stock Quote
Alibaba Group Holding Limited
$90.18 (-1.97%) $-1.81

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