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This Week's Exclusive Content Down 25%, Chinese Giant PDD Could Be a Strong Long-Term ValueAuthored by Leo Miller. Published: 3/30/2026. 
Key Points - PDD, the owner of e-commerce platform Temu, has seen its share price take a meaningful hit.
- Profitability is tanking near-term, but that's part of the plan.
- The stock's valuation appears overly pessimistic, setting up a potential opportunity for strong long-term gains.
- Special Report: The Biggest IPO Ever: Claim Your Stake Today
PDD (NASDAQ: PDD) is one of many stocks that have experienced a significant downturn in recent months. The stock is more than 25% below its 52-week high from November 2025 and has fallen over 10% so far in 2026. The consumer discretionary firm is one of the largest e-commerce players in China, where it operates the Pinduoduo platform. Outside China, PDD runs the e-commerce app Temu. The company faces legitimate concerns, including unfavorable U.S. trade policies toward Chinese imports and the need to scale up its investments. A former Pentagon and CIA advisor is flagging April 15 as a critical date for gold investors. He says the U.S. government is set to grant final authorization for mining operations at what he believes is the largest gold deposit in the world. The company behind it trades at just $2 per share and has largely flown under the radar. He believes early investors positioned before the announcement stand to benefit most. View his full analysis and see the details behind this gold play Growth and profitability deteriorated markedly in 2025. Even so, PDD’s valuation now looks relatively attractive: shares trade at a forward price-to-earnings ratio near 8x, roughly 40% below their three-year average of about 14x. After PDD’s latest earnings report, it is a good time to reassess the stock’s outlook. PDD: Revenue and Profits Move in Opposite Directions In fiscal Q4 2025, PDD posted revenue growth of 12%. Total sales were 123,912 million Chinese renminbi (approximately $17.72 billion), slightly above estimates of $17.57 billion. Adjusted earnings per diluted American Depository Share (ADS) fell 10%, coming in at $2.53 and missing estimates of $2.88. Full-year revenue rose 10%, a sharp deceleration from 59% in 2024. The company’s full-year adjusted operating margin also contracted by about 625 basis points to 23.75%. Much of the margin deterioration resulted from a 23% increase in costs of revenue in 2025, well above revenue growth. Research and development spending also jumped 30%. Creating a Stronger Ecosystem: Short-Term Pain for Long-Term Gain? PDD is pursuing several initiatives that are weighing on near-term profitability but that it says will create long-term value. These moves include supporting merchants to produce higher-quality, more consistent products and strengthening the logistics network in rural China. In short, PDD is shifting its business model. Historically, Pinduoduo functioned mainly as a marketplace where merchants sold products. Going forward, PDD intends to become a partner and resource that helps merchants improve their operations. The goal is to build a stronger ecosystem with better merchants and an improved consumer experience. This transformation is still in its early stages: the firm committed to a three-year supply-chain overhaul in November 2025. PDD does not disclose Temu revenue separately, but its Transaction Services revenue is often used as a rough proxy. Sales in that category rose 19% — the fastest pace in the past four quarters — suggesting improvement in this area. The company is also investing heavily in Temu, largely to mitigate tariffs on low-priced goods. PDD’s Undemanding Valuation Points to Opportunity Despite near-term profitability challenges, PDD remains a strong cash generator, producing $15.3 billion in cash from operations (CFO) in 2025. The company reports free cash flow (FCF) only annually and has not yet released the 2025 FCF figure. Note that: FCF = CFO – Capital Expenditures (CapEx). Using 2024 figures as a guide, we can estimate a plausible 2025 FCF. In 2024, CFO was $16.7 billion and CapEx was $132.5 million, indicating CapEx was a minimal drag on FCF. Even if CapEx tripled to $400 million in 2025 — a large increase relative to past trends — FCF would still be roughly $14.9 billion. Using that as a 2025 FCF estimate, the current valuation implies zero or even slightly negative annual FCF growth over a multi-year horizon. By contrast, from 2021 to 2025 the company nearly quadrupled FCF from $4.01 billion to an estimated $14.9 billion, a compound annual growth rate of about 39%. The dynamics that powered that rapid FCF growth are different today: revenue growth has slowed to 10% (from 59% in 2024, 90% in 2023 and 39% in 2022), and profit margins narrowed considerably in 2025. Still, investors may be overly pessimistic about PDD's prospects. The market appears to be pricing in a shift from multi-year FCF growth near 40% to zero or negative growth — a scenario that would require many things to go wrong. That gap arguably provides a meaningful margin of safety. It is reasonable to expect that, once its investment phase concludes, margins could stabilize and the company could resume moderate, profitable growth. If that happens, shares could see significant upside. | 
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