Analysts Just Made A Sizeable Upgrade To Their Pinduoduo Inc. (NASDAQ:PDD) Forecasts

Pinduoduo Inc. (NASDAQ:PDD) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's forecasts. Consensus estimates suggest investors could expect greatly increased statutory revenues and earnings per share, with the analysts modelling a real improvement in business performance. Pinduoduo has also found favour with investors, with the stock up a magnificent 32% to US$66.49 over the past week. We'll be curious to see if these new estimates convince the market to lift the stock price higher still.

After the upgrade, the 39 analysts covering Pinduoduo are now predicting revenues of CN¥122b in 2022. If met, this would reflect a decent 17% improvement in sales compared to the last 12 months. Statutory earnings per share are forecast to be CN¥15.72, approximately in line with the last 12 months. Prior to this update, the analysts had been forecasting revenues of CN¥110b and earnings per share (EPS) of CN¥9.26 in 2022. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.

Check out our latest analysis for Pinduoduo

With these upgrades, we're not surprised to see that the analysts have lifted their price target 23% to CN¥572 per share. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Pinduoduo analyst has a price target of CN¥127 per share, while the most pessimistic values it at CN¥39.61. This is a very narrow spread of estimates, implying either that Pinduoduo is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's pretty clear that there is an expectation that Pinduoduo's revenue growth will slow down substantially, with revenues to the end of 2022 expected to display 38% growth on an annualised basis. This is compared to a historical growth rate of 51% over the past three years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 13% annually. Even after the forecast slowdown in growth, it seems obvious that Pinduoduo is also expected to grow faster than the wider industry.

The Bottom Line

The biggest takeaway for us from these new estimates is that analysts upgraded their earnings per share estimates, with improved earnings power expected for this year. They also upgraded their revenue estimates for this year, and sales are expected to grow faster than the wider market. With a serious upgrade to expectations and a rising price target, it might be time to take another look at Pinduoduo.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Pinduoduo analysts - going out to 2024, and you can see them free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.