PDD Holdings Inc. (PDD): A Bull Case Theory

We came across a bullish thesis on PDD Holdings Inc. on Natan’s Substack. In this article, we will summarize the bulls’ thesis on PDD. PDD Holdings Inc.'s share was trading at $131.01 as of September 25th. PDD’s trailing and forward P/E were 14.09 and 11.24 respectively according to Yahoo Finance.

During Q2 2025, PDD Holdings reported revenues of RMB 104 billion, in line with expectations, and delivered earnings per share of RMB 22.1, a remarkable 50% above consensus. The earnings beat was driven partly by a near doubling of interest income, but a significant contributor was lower-than-expected operating costs. Expenses had been revised downward following the steep margin collapse in Q1, making the upside surprise particularly notable. Revenue in China’s marketing services grew 13%, while Transaction Services, including Temu and Duoduo Grocery, remained flat; however, this understates true GMV expansion, with Temu GMV up over 30% year-over-year.

The shift toward a semi-managed model reduced recognized revenue, while marketing expenses declined due to lower U.S. spending after April tariffs and reduced voucher distribution in China. Despite strong results, the stock initially surged 10% but ended the day down 3%, reflecting a recurring pattern in which management cautions that Q2 margins are not sustainable, citing ongoing investments and subsidies that will weigh on future profitability. Some interpret this cautious guidance as a strategy to maintain favorable government relations, but it also underscores the company’s agility in navigating a hyper-competitive e-commerce landscape.

PDD’s unconventional communication style, often perceived as “disregard for investors,” has historically delivered superior results relative to competitors. With a long-term, startup-like focus and valuation at an EV/FCF below 10, the company remains attractively priced. Investors may view the current pullbacks as opportunities to accumulate shares, while the strong execution track record supports confidence in management’s ability to sustain growth and profitability over time.

Previously we covered a bullish thesis on PDD Holdings Inc. (PDD) by Favona Hathaway in May 2025, which highlighted the company’s rapid growth, strong financials, and dominant position in value-for-money e-commerce through its C2M model and global expansion via Temu. The stock has appreciated approximately 33.84% since our coverage. The thesis still stands as PDD maintains robust growth. Natan shares a similar perspective but emphasizes Q2 2025 earnings, cost efficiency, and management’s strategic agility.

PDD Holdings Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 65 hedge fund portfolios held PDD at the end of the second quarter which was 87 in the previous quarter. While we acknowledge the potential of PDD as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.