Extending a trend that’s been underway since March of last year, shares of China’s e-commerce outfit PDD Holdings (PDD -5.62%) gained 2.9% today. There was no company-specific news behind today’s move. But, there’s a reason nonetheless… a noteworthy one with implications for shareholders of any of China’s top e-commerce players.
PDD is winning favor, at the expense of JD.com and Alibaba
Don’t look for a company-specific reason shares of PDD (the company formerly called Pinduoduo) did so well during Monday’s lethargic trading session. You won’t find one.
Rather, just know that this stock continues to make gains because the underlying company is doing well and a growing number of investors want on board. Last quarter’s top line was up 94% year over year, for perspective. Its profits are soaring too. This rapid progress is much better than the growth rates currently being reported by China’s longer-established e-commerce players like Alibaba (BABA -3.78%) and JD.com (JD -4.67%).
That’s the overarching reason for a curious dynamic among China’s top online shopping platforms right now. Investors – at least some investors – appear to be shedding their stakes in JD and Alibaba and replacing them with a position in PDD.
Then again, who can blame them? JD.com founder and chairman Richard Liu Qiangdong recently penned a letter to the company’s employees urging them not to “lie flat” while competitors take market share, according to reporting from the South China Morning Post. Although the rallying cry is well-timed and arguably necessary, it’s also effectively an admission that competitors like PDD have found a winning formula JD hasn’t.
That winning formula is mostly huge growth outside of China, by the way, where PDD does business as Temu.
At the same time, after nearly three years’ worth of poor performance JD stock is finally being booted out of the Nasdaq 100 Index, undermining much of any remaining institutional support keeping the stock propped up.
Meanwhile, Alibaba shares’ persistent weakness has finally caught up with them in a way that doesn’t hurt the company’s results, but does dent the stock’s stature with existing and prospective investors. As of today, PDD boasts a bigger market cap than Alibaba does, reversing positions that had been in place since PDD’s public offering all the way back in 2018.
There’s (usually) no such thing as bad publicity
Nothing about PDD’s comparative market cap or JD.com’s panicking management changes anything about PDD’s current or future results. JD’s Qiangdong is going to push to reinvigorate the company with or without making a companywide plea. PDD’s market capitalization would be nearly $190 billion today regardless of Alibaba’s now-smaller market cap. The information being heavily circulated today is all superficial.
To the extent rhetoric and stories matter in terms of getting investors’ attention though, today’s spotlight on PDD certainly doesn’t hurt the bullish argument. If you were mulling a stake in the up-and-coming company, you’ve now got yet-another reason to go ahead and step in… more people are watching it move forward.
