Pinduoduo (PDD) Q3 Earnings Growth Expected: Time You Sell?

in EARNINGS/INVESTING IDEAS by

Pinduoduo is scheduled to report Q3 earnings results on November 20, 2019, at 7:30 am EST before markets open for trading.

Pinduoduo Inc. (NASDAQGS:PDD) is expected to report earnings of -$0.08/share on revenue of $1.034 billion. The consensus earnings per share (EPS) of -$0.08/share is based on a poll of 11 analysts and represents an improvement of $0.09 over the same quarter last year when the company reported earnings of -$0.17/share.

The revenue forecast of $1.034 billion based on a poll of 12 analysts implies a year-over-year (YoY) growth of 110.6%. Last year the company reported $491 million in revenue for the quarter.

Expected to report EPS of -$0.08/share for Q3, 2019
Metric Expected Prior Year YoY Change
Revenue $1,033.82 $490.98 110.6%
EPS -$0.08 -$0.17 NM

The company has delivered robust revenue growth over the last few years with trailing twelve months (TTM) revenue increasing from $72 million in 2016 to $2.4 billion for TTM June 30, 2019.

PPD Revenue Profit Margin

Source: Finbox

Earnings Call Trends

Historically, management has exceeded analyst expectations 3 out of the last 4 tracked quarters, and missed expectations 1 quarter. What are your expectations from Pinduoduo for earnings this quarter? Let us know in the comments!

Analyst Expected vs Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2019 -$0.21 -$0.05 NM Beat
Q1, 2019 -$0.26 -$0.18 NM Beat
Q4, 2018 -$0.19 -$0.25 NM Missed
Q3, 2018 -$0.24 -$0.17 NM Beat

One question we always consider here at the Bankers’ Tribune is how important are earnings reports to Pinduoduo’s stock price performance? It’s more important for some companies than for others.

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2019, the stock price reacted by increasing by 17.8%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
2019-08-21 $25.96 $30.59 17.8% Increase
2019-05-20 $22.70 $21.52 -5.2% Decline
2019-03-13 $30.43 $24.39 -19.8% Decline
2018-11-20 $19.84 $23.66 19.3% Increase

Fundamentals And Technical Analysis

Pinduoduo is currently trading at $41.51/share, down -2.9% for the day. The company is trading at approximately 96.9% of its 52-week high of $42.85/share. The company’s stock price is up 59.9% since the last earnings report and down -4.4% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 61.57 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.

The current share price implies a price-to-earnings (P/E) multiple of -52.6x and a forward P/E multiple of -106.4x. Pinduoduo’s current share price also implies a price-to-book (P/B) multiple of 13.4x. The following table summarizes some other key fundamental ratios:

Data as of November 18, 2019
Metric Value
Last Fiscal Period FY2019.Q2
Period End Date June 30, 2019
Stock Price (Current) $41.51
P/E Ratio -52.6x
P/E Ratio (Fwd) -106.4x
PEG Ratio 0.5
Total Debt to Capital (%) 0.1%
Levered Free Cash Flow $9.939 billion
Enterprise Value / EBITDA -44.1x

Company Profile: Pinduoduo Inc.

Pinduoduo Inc. is a large-cap stock with a market capitalization of $48.2 billion and a total enterprise value of $43.7 billion. The company operates in the Consumer Discretionary sector and Internet & Direct Marketing Retail industry.

Pinduoduo Inc. operates an e-commerce platform in the People’s Republic of China. It operates Pinduoduo, a mobile platform that offers a range of products, including apparel, shoes, bags, mother and childcare products, food and beverage, fresh produce, electronic appliances, furniture, and household goods, cosmetics and other personal care items, sports and fitness items, and auto accessories.

The company was formerly known as Walnut Street Group Holding Limited and changed its name to Pinduoduo Inc. in July 2018. Pinduoduo Inc. was founded in 2015 and is based in Shanghai, the People’s Republic of China.

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