Review of Pinduoduo's 3Q2021 results and price performance

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Pinduoduo's share price has almost halved since November 2021 after its results announcement of its 3Q2021 results. The 50% drop in price since November 2021 results at a peak fear of Chinese tech stocks within a span of 1.5 months is not uncommon across a number of Chinese tech stocks, including Bilibili, Alibaba, etc. Alibaba tanked from 178 USD all the way to around 108 USD at one point in time.

So back to the Pinduoduo, which supposedly is supposed to be less affected since its support for the agriculture sector given its agriculture and interactive platform...

So what really happened? I think what gave the shortsellers the "support" comes from the statement that Pinduoduo will not be aggressively chasing sales and the high multiple that the market initially gave to Pinduoduo when it was over 100 USD wasnt so called convincing to the funds that shortsellers utilised this opportunity to further shortsell the shares of Pinduoduo.

Furthermore, the decline of merchandise sales from 2Q2021 to 3Q2021 was so significant that I wonder if there is a significant change in strategy that warrants a closer look.

All in all, a thought through has to be made as in if the change of strategy from aggressively pushing UP the sales as well as the significant decrease in merchandise sales warrants a closer look.

If sales are to grow much slower and profit figure remains at current level, 1 billion USD of net income for a market capitalisation of 75 billion USD (at a share price of around 60 USD) may not be super attractive now. We have to see in the near future if there will be less stringent tech regulations allowing Pinduoduo to readopt a more aggressive sales strategy yet allowing its to maintain its profit margin..

Summary: I will not be acquiring a position in Pinduoduo until I notice any change of strategy in Pinduoduo or a less stringent set of tech regulations in China.

As always, this should not be construed as any investment or trading advice.

r/great_investment

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