Pinduoduo (PDD 2.80%) published its third-quarter results before the market opened Tuesday, and the stock surged as investors responded to its results. The Chinese e-commerce specialist's share price was up 16.9% as of 11 a.m. ET, according to data from S&P Global Market Intelligence.
The company reported non-GAAP (adjusted) earnings per American depositary share of $1.55 on revenue of $9.44 billion, trouncing the analysts' average estimates for earnings per share of $1.16 on revenue of $7.42 billion.
Temu powers Pinduoduo to a massive Q3 beat
Revenue for the period was up 94% year over year, with impressive growth being driven by its online marketing services and transaction services segments. Sales for the online marketing business jumped 39% year over year to roughly $5.44 billion, while transaction services revenue skyrocketed by about 315% to approximately $4 billion.
Pinduoduo's excellent Q3 performance was driven primarily by strong demand across its Temu e-commerce platform, which incorporates elements of social shopping and often allows users to find prices on goods that are significantly lower than what can be found on alternative platforms. Temu has been highly popular in China for years, but the app is now rapidly gaining ground in the U.S. and other markets.
Amid the strong sales performance, adjusted net income jumped 37% year over year to approximately $2.33 billion. All in all, it was a blowout quarter for the e-commerce specialist.
Is Pinduoduo stock a buy?
Pinduoduo is posting strong sales growth and recording encouraging net income margins. Notably, the stock is still down roughly 32% from its high even after Tuesday morning's explosive gains.
PDD PE Ratio (Forward 1y) data by YCharts.
While there are macroeconomic and geopolitical risks associated with investing in Chinese stocks, Pinduoduo's recent performance and current valuation profile suggest that the stock could still have significant upside potential. Trading at roughly 22 times next year's expected earnings, its shares could be a worthwhile portfolio addition for risk-tolerant investors.
