What happened

Shares of Chinese e-commerce challenger Pinduoduo (PDD -5.29%) fell today, down 12.7% as of 12:41 p.m. ET.

Pinduoduo reported its fourth-quarter 2022 earnings this morning. On the surface, Pinduoduo's growth appeared strong in absolute terms, especially relative to some of its larger rivals. However, the numbers from this challenger to established giants such as JD.com (JD -4.13%) and Alibaba came in just shy of analyst expectations.

As the stock had rallied pretty strongly since November 2022, it sold off hard on this "disappointment." But is the stock an opportunity now? 

So what

In the fourth quarter, Pinduoduo reported 46% revenue growth to $5.78 billion, missing expectations by $140 million, while printing adjusted (non-GAAP, or generally accepted accounting principles) earnings per share of $1.21, missing by $0.03.

Normally, an e-commerce company generating 46% growth, even in a tumultuous time in the Chinese economy, along with solid profitability, would be greeted well. However, Pinduoduo's U.S.-traded ADS had already practically doubled from November through early February. So, perhaps investors were expecting more.

Still, Pinduoduo's valuation doesn't seem that demanding, especially if it can maintain its position as a go-to website for group buying and low-priced goods. For all of 2022, the company generated $18.9 billion in revenue and $4.4 billion in operating profit, with a current market cap of about $116 billion. So the stock goes for about 26 times operating profit, which isn't expensive if the company can keep up its solid growth.

Pinduoduo has benefited from being a low-cost platform, whereby Chinese consumers can link up with each other and form groups to get bigger discounts from vendors. That low-cost strategy appeared to pay off this year, as the Chinese consumer appeared price-conscious amid lockdowns and economic hardship in China's property sector.

And yet investors were apparently expecting more. Moreover, Pinduoduo rival JD.com announced on its recent earnings call that it was going to increase subsidies in a bid to match rivals' low prices and win back market share. This might make investors nervous about the upcoming price war.

Now what

Pinduoduo is an intriguing way to play the growth of China through its low-price platform. Should the Chinese economy remain OK but a lot of the population remain price conscious, the stock looks interesting.

On the other hand, virtually all Chinese tech stocks trade at discounts to their American counterparts. This is likely due to the difficult geopolitical tensions between the two nations, as well as the threat that should China become even more isolated, perhaps by helping Russia militarily, that Americans may not be able to hold Chinese stocks, even U.S.-listed ones.

Therefore, investors need to figure out how much China exposure they can stomach. There are deals to be had, but those seeming bargains could lose a material amount of value should the geopolitical relationship with the U.S. materially worsen.