Out of the many Chinese companies listed in the United States, few are stronger than Pinduoduo (NASDAQ:PDD) stock right now. You may know the massive potential with Chinese e-commerce titans like Alibaba (NYSE:BABA). But, this lesser-known name is another way to play a key megatrend — the rise of China’s consumer economy.
Granted, this lesser-known name targets a lower-income demographic than Alibaba. Its business model is a bit different as well. Instead of individual shoppers buying goods like you would on Amazon (NASDAQ:AMZN), this company focuses on team purchases. That is to say, groups of people pooling money to buy a large lot of goods.
But despite its differences, it’s catching on quick in China. Looking at the key performance indicators, this company’s growing with a capital G. Between year-over-year sales growth in the triple digits and double-digit gains in monthly active users, the growth train isn’t stopping anytime soon.
Yes, shares today reflect this massive growth potential. In the past year alone, the stock is up 320%. In the past six months alone, shares have more than doubled. But, I don’t think shares are ready to top out.
With blockbuster numbers and a strong growth runway, enter a position ASAP, while the company’s still on the ground floor.
Why Is PDD Stock So Strong?
What makes this one of the best U.S.-listed Chinese stocks to own right now? One word: growth. Yes, names like Alibaba have posted strong results as of late. But, with Pinduoduo, the company’s just getting started. Even as it has already captured a large piece of the Chinese e-commerce pie.
Right now, the company boasts 487.4 million monthly active users. Things have scaled up significantly since 2017 (when the company had just 141 million users). Yet, there’s still plenty of room to grow. By comparison, Alibaba has 846 million monthly active users. But with double-digit sales and user growth, expect Pinduoduo to close the gap fast.
This analyst believes Pinduoduo’s Chinese e-commerce market share will grow from 10% today, to 18% by 2024.
All of this translates into strong top and bottom-line growth going forward. Between this year and the next, sales are projected to climb 58%. Also, consensus estimates call for the company to hit profitability in 2021. In short, this e-commerce powerhouse, still not well known by American investors, is yet another “Amazon of China” in the making.
Yet, despite these strengths, with shares on fire right now, I can see why you may be concerned. Valuation is high, I agree. But don’t let splitting hairs make you miss out on this strong opportunity.
Don’t Let Valuation Keep You From This Opportunity
With megatrends on its side, and catalysts in motion, it’s no surprise PDD stock trades at a rich valuation. Shares currently change hands at an enterprise value/sales (EV/sales) ratio of 21.2. By comparison, Alibaba’s EV/sales ratio is 8.2.
This valuation discrepancy alone may scare off a lot of cautious investors. But, as I’ve discussed above, when you factor in growth, this valuation makes sense. Don’t miss the forest for the trees. This company is quickly gaining on its largest rival. And that means ample share price upside from here.
How? Take a look at Pinduoduo’s market capitalization, and compare it to Alibaba’s. This company currently sports a valuation of $104 billion. Alibaba’s market cap right now is $603 billion. That’s not to say this company will see its shares move six-fold before it’s all done. But, it demonstrates that today’s valuation, albeit rich, has yet to be stretched.
You may also be concerned about the risk of investing in Chinese-based stocks. Besides the talk out of Washington about delisting U.S.-listed foreign companies, rising tensions between the two largest economies may have you worried as well.
Yet, as I previously discussed, the social unrest unraveling in America may make China a relatively more stable place to invest right now. In short, the amount of risk involved investing in Chinese stocks versus American stocks may not be as much as you think.
Get in on the Ground Floor With Pinduoduo
After rising more than four-fold in the past 12 months, you may think it’s too late to hop on the growth train with Pinduoduo stock. Yet, despite its epic run as of late, you can still buy it today, and get in on the ground floor.
Sure, the company has grown massively in the past few years. But, with the company catching up quick with Alibaba, it’ll only be a matter of time before this name reaches the scale of its better-known rival.
Valuation is high, as should be expected with a growth story like this. But, don’t miss the forest for the trees. Buy PDD stock now, before shares move even higher from here.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA) and +1,044% in Tesla (TSLA), just to name a few. Click here to see what Matt has up his sleeve now. Matt does not directly own the aforementioned securities.
