Investors in Pinduoduo Inc. (NASDAQ:PDD) had a good week, as its shares rose 8.9% to close at US$68.70 following the release of its quarterly results. Revenues came in 26% better than analyst models expected, at CN¥6.5b, although statutory losses ballooned 59% to CN¥3.54, which is much worse than what was forecast. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, the current consensus from Pinduoduo's 27 analysts is for revenues of CN¥47.4b in 2020, which would reflect a sizeable 48% increase on its sales over the past 12 months. Losses are forecast to narrow 4.6% to CN¥7.56 per share. Before this earnings announcement, the analysts had been modelling revenues of CN¥45.9b and losses of CN¥4.17 per share in 2020. While this year's revenue estimates increased, there was also a loss per share expectations, suggesting the consensus has a bit of a mixed view on the stock.
The average price target rose 30% to CN¥405, even thoughthe analysts have been updating their forecasts to show higher revenues and higher forecast losses. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Pinduoduo analyst has a price target of CN¥89.90 per share, while the most pessimistic values it at CN¥21.83. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that Pinduoduo's revenue growth is expected to slow, with forecast 48% increase next year well below the historical 97% growth over the last year. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 17% next year. So it's pretty clear that, while Pinduoduo's revenue growth is expected to slow, it's still expected to grow faster than the industry itself.
The Bottom Line
The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at Pinduoduo. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Pinduoduo analysts - going out to 2023, and you can see them free on our platform here.
It is also worth noting that we have found 2 warning signs for Pinduoduo that you need to take into consideration.
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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Thank you for reading.