U.S.-Listed PDD Stock Rose 1.66% Yesterday as Pinduoduo Is Serious Rival to Alibaba and JD

UTC by Steve Muchoki · 3 min read
U.S.-Listed PDD Stock Rose 1.66% Yesterday as Pinduoduo Is Serious Rival to Alibaba and JD
Photo: Pinduoduo / Facebook

Pinduoduo (PDD) stock rose by 1.66% to trade slightly above $50 on April 21. The U.S.-listed Chinese company is becoming a fast-growing rival to Alibaba and JD in China.

Pinduoduo Inc (NASDAQ: PDD) stock jumped by nearly 2% on April 21, to retest its all-time high. Its stock and business at large have largely benefited from the ongoing coronavirus crisis. As other traditional stock markets continue showing signs of tumbling further, Pinduoduo stock market is soaring up in the sky. Today, in the pre-market, PDD is trading at $51.69 (+1.47 %).

This is largely attributed to the nature of its business, e-commerce, at a time when social distancing is pushing people to prefer online shopping. With the virus thriving with no vaccine until maybe a year or so, the current figures might get higher if it’s not tamed otherwise.

At the time of reporting according to the Johns Hopkins University of Medicine, the global confirmed cases stood at 2,578,930, while the fatalities tally around 178K.

With that in mind, Pinduoduo sales might surge in the second quarter in comparison to the first quarter. The company is ranked third-largest e-commerce player Alibaba and JD.com which command a huge market percentage in China.

However, Pinduoduo is appealing to its customers in that it offers a group buying function. This works where the more people who buy a product leads to a lower price. This is a social shopping model that encourages users to share links to items they purchase with friends and participate in group buying.

Pinduoduo Business Model amid Growing Stock Price

According to the set rules of the group buying function, each item has a minimum number of buyers required to complete the purchase. However, if the number is not met in 24 hours, it will prompt the group buy to be canceled automatically and the money refunded to those who had already committed their money.

Pinduoduo customers get to enjoy a cheaper price in the group buys function in comparison to buying the item directly.

As a result, 100% of the business revenue has been coming from its online marketplace services. Including commissions, the company gets from sales on its platform, besides its ad system.

The company, however, is getting stiff competition from Alibaba and also from JD.com e-commerce businesses, whereby the two rivals have an extra business like cloud computing. The company has been penetrating the Chinese market at a fast pace, whereby its sales percentage has been rising exponentially.

However, in the last quarter of 2019, the company recorded net loss while its rivals recorded a net profit.

In a bid to take advantage of the huge market due to coronavirus, the company has raised $1.1 billion in a private share placement. The company issues newly Class A ordinary shares representing approximately 2.8% of the total outstanding shares.

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