From Nasdaq:

PDD (NASDAQ: PDD) is growing rapidly and some believe it has the potential to become the next “Amazon of China”. PDD’s annual revenue has grown at a compound annual growth rate (CAGR) of 78%, and it turned profitable on a GAAP basis in 2021. Analysts expect its revenue to grow by 81% in 2023 and its earnings to rise by 49%. However, the company faces challenges in terms of regulatory threats and overseas expansion, and it still too small compared to Amazon’s enterprise value of $1.68 trillion.

PDD has some similarities to Amazon but they have different business models. PDD is a third-party e-commerce marketplace and has a social media team-up strategy for bulk discounts. It directly connects farmers to shoppers for its agriculture sales. On the other hand, Amazon operates first-party and third-party marketplaces, brick-and-mortar and online stores (Amazon Go, Amazon Fresh, Whole Foods Market), and owns Amazon Web Services (AWS), the world’s largest cloud infrastructure platform.

PDD’s revenue growth projections are impressive. Analysts expect it to generate 235.8 billion yuan in revenue in 2023, which is comparable to Amazon in 2010. It’s expected to have a compound annual growth rate (CAGR) of 46% from 2022 to 2025. If it continues to grow at a CAGR of 24%, it could potentially generate 4 billion yuan in revenue, comparable to today’s Amazon, by 2036.

However, PDD investors should be mindful of regulatory threats. PDD could face antitrust issues similar to Alibaba’s if it becomes bigger. Its overseas expansion might face scrutiny from U.S. regulators especially amid spyware concerns. While PDD has tried to mitigate these concerns, its perceived Chinese origin could hamper its overseas expansion and long-term growth potential.

Investors should be cautious before investing in PDD. It might be a smaller company with a reasonable stock valuation, but it still has plenty of room to grow. The road ahead might be turbulent, but PDD could easily eclipse Alibaba and JD as the true “Amazon of China” over the next few decades. Be sure to do thorough research before considering an investment in PDD Holdings.



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