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Pinduoduo Inc.'s (NASDAQ:PDD) Profit Outlook

Simply Wall St

Pinduoduo Inc.'s (NASDAQ:PDD): Pinduoduo Inc., through its subsidiaries, operates an e-commerce platform in the People's Republic of China. The US$105b market-cap posted a loss in its most recent financial year of CN¥7.0b and a latest trailing-twelve-month loss of CN¥9.2b leading to an even wider gap between loss and breakeven. As path to profitability is the topic on PDD’s investors mind, I’ve decided to gauge market sentiment. In this article, I will touch on the expectations for PDD’s growth and when analysts expect the company to become profitable.

See our latest analysis for Pinduoduo

Consensus from the 32 Online Retail analysts is PDD is on the verge of breakeven. They anticipate the company to incur a final loss in 2020, before generating positive profits of CN¥2.5b in 2021. Therefore, PDD is expected to breakeven roughly a few months from now. In order to meet this breakeven date, I calculated the rate at which PDD must grow year-on-year. It turns out an average annual growth rate of 103% is expected, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.

earnings-per-share-growth
earnings-per-share-growth

I’m not going to go through company-specific developments for PDD given that this is a high-level summary, but, take into account that typically a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

One thing I’d like to point out is that PDD has managed its capital prudently, with debt making up 35% of equity. This means that PDD has predominantly funded its operations from equity capital,and its low debt obligation reduces the risk around investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on PDD, so if you are interested in understanding the company at a deeper level, take a look at PDD’s company page on Simply Wall St. I’ve also put together a list of essential factors you should look at:

  1. Valuation: What is PDD worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether PDD is currently mispriced by the market.

  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Pinduoduo’s board and the CEO’s back ground.

  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.