Pinduoduo Inc.’s (NASDAQ:PDD) Path To Profitability

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Pinduoduo Inc.’s (NASDAQ:PDD): Pinduoduo Inc., through its subsidiaries, operates an e-commerce platform in the People’s Republic of China. The company’s loss has recently broadened since it announced a -CN¥10.3b loss in the full financial year, compared to the latest trailing-twelve-month loss of -CN¥11.9b, moving it further away from 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.

Check out our latest analysis for Pinduoduo

According to the 21 industry analysts covering PDD, the consensus is breakeven is near. They anticipate the company to incur a final loss in 2019, before generating positive profits of CN¥5.1b in 2020. 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 83% is expected, which signals high confidence from analysts. If this rate turns out to be too aggressive, PDD may become profitable much later than analysts predict.

NasdaqGS:PDD Past and Future Earnings, July 17th 2019
NasdaqGS:PDD Past and Future Earnings, July 17th 2019

I’m not going to go through company-specific developments for PDD given that this is a high-level summary, however, bear in mind that typically a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

Before I wrap up, there’s one aspect worth mentioning. PDD currently has no debt on its balance sheet, which is quite unusual for a cash-burning loss-making, growth company, which typically has high debt relative to its equity. PDD currently operates purely off its shareholder funding and has no debt obligation, reducing concerns around repayments and making it a less risky investment.

Next Steps:

There are key fundamentals of PDD which are not covered in this article, but I must stress again that this is merely a basic overview. For a more comprehensive look at PDD, take a look at PDD’s company page on Simply Wall St. I’ve also put together a list of important factors you should further examine:

  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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.