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While Pinduoduo Inc’s (NASDAQ:PDD) near-term prospects remain under pressure due to elevated competition, its big new customer wins and market share gains in high-frequency categories bode well for growth in the long term, according to KeyBanc Capital Markets.
The Pinduoduo Analyst: Hans Chung maintained an Overweight rating on Pinduoduo, with a $100 price target.
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The Pinduoduo Thesis: The company reported mixed second-quarter results Friday, with in-line revenue due to a higher take rate and a better operating loss due to lower sales and marketing expense, Chung said a Monday note. (See his track record here.)
Despite stiffening competition and higher promotions from peers, Pinduoduo incurred higher expenses on new customer acquisitions to capitalize on the acceleration in e-commerce adoption, the analyst said.
"We view PDD's change in growing tactics as a positive move from a LT perspective as high-frequency categories help drive user engagement and stickiness to the platform, and eventually could lead to upselling opportunities."
Agriculture e-commerce is a compelling long-term opportunity for Pinduoduo, given its large total addressable market and barriers, Chung said.
The team purchase model gives the company a unique advantage, and efforts to improve the supply chain and food safety "could further enhance its competitive moat," the analyst said.
The company has a long runway for growth, given its low monetization, massive user scale and healthy engagement, according to KeyBanc.
PDD Price Action: Shares of Pinduoduo were trading higher by 0.14% at $84.12 at the time of publication Monday.
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Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.