We Raise PDD FVE to USD 105 After Tweaking Model; Shares Attractive Following Share Price Pullback

Narrow-moat PDD Holdings’ (previously known as Pinduoduo Inc) shares sold off 14% after reporting fourth-quarter results, as revenue missed Refinitiv consensus as of March 20 by 3% and our estimate by 14%, and non-GAAP operating income missed consensus by 5% and our estimate by 6%. We estimate that gross merchandise volume year-on-year growth in the quarter decelerated and the take rate (transaction services and online marketing services revenue/GMV) declined sequentially. We think PDD’s long-term market share gain, take-rate increase, and margin expansion trend has not changed.