PDD Holdings Inc. Sponsored ADR (PDD) Is a Trending Stock: Facts to Know Before Betting on It

PDD Holdings Inc. Sponsored ADR (PDD) has been one of the most searched-for stocks on Zacks.com lately. So, you might want to look at some of the facts that could shape the stock's performance in the near term.Over the past month, shares of this company have returned -13%, compared to the Zacks S&P 500 composite's +6.1% change. During this period, the Zacks Internet - Commerce industry, which PDD Holdings Inc. Sponsored ADR falls in, has gained 8.7%. The key question now is: What could be the stock's future direction?Although media reports or rumors about a significant change in a company's business prospects usually cause its stock to trend and lead to an immediate price change, there are always certain fundamental factors that ultimately drive the buy-and-hold decision.Earnings Estimate RevisionsRather than focusing on anything else, we at Zacks prioritize evaluating the change in a company's earnings projection. This is because we believe the fair value for its stock is determined by the present value of its future stream of earnings.Our analysis is essentially based on how sell-side analysts covering the stock are revising their earnings estimates to take the latest business trends into account. When earnings estimates for a company go up, the fair value for its stock goes up as well. And when a stock's fair value is higher than its current market price, investors tend to buy the stock, resulting in its price moving upward. Because of this, empirical studies indicate a strong correlation between trends in earnings estimate revisions and short-term stock price movements.PDD Holdings Inc. Sponsored ADR is expected to post earnings of $2.04 per share for the current quarter, representing a year-over-year change of -36.3%. Over the last 30 days, the Zacks Consensus Estimate has changed -30.4%.The consensus earnings estimate of $8.78 for the current fiscal year indicates a year-over-year change of -22.4%. This estimate has changed -29.3% over the last 30 days.For the next fiscal year, the consensus earnings estimate of $11.27 indicates a change of +28.3% from what PDD Holdings Inc. Sponsored ADR is expected to report a year ago. Over the past month, the estimate has changed -16.8%.With an impressive externally audited track record, our proprietary stock rating tool -- the Zacks Rank -- is a more conclusive indicator of a stock's near-term price performance, as it effectively harnesses the power of earnings estimate revisions. The size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, has resulted in a Zacks Rank #5 (Strong Sell) for PDD Holdings Inc. Sponsored ADR.The chart below shows the evolution of the company's forward 12-month consensus EPS estimate:12 Month EPSRevenue Growth ForecastWhile earnings growth is arguably the most superior indicator of a company's financial health, nothing happens as such if a business isn't able to grow its revenues. After all, it's nearly impossible for a company to increase its earnings for an extended period without increasing its revenues. So, it's important to know a company's potential revenue growth.In the case of PDD Holdings Inc. Sponsored ADR, the consensus sales estimate of $14.6 billion for the current quarter points to a year-over-year change of +9.3%. The $60.04 billion and $67.93 billion estimates for the current and next fiscal years indicate changes of +9.8% and +13.1%, respectively.Last Reported Results and Surprise HistoryPDD Holdings Inc. Sponsored ADR reported revenues of $13.18 billion in the last reported quarter, representing a year-over-year change of +9.7%. EPS of $1.56 for the same period compares with $2.83 a year ago.Compared to the Zacks Consensus Estimate of $14.17 billion, the reported revenues represent a surprise of -6.93%. The EPS surprise was -37.35%.Over the last four quarters, PDD Holdings Inc. Sponsored ADR surpassed consensus EPS estimates two times. The company could not beat consensus revenue estimates in any of the last four quarters.ValuationNo investment decision can be efficient without considering a stock's valuation. Whether a stock's current price rightly reflects the intrinsic value of the underlying business and the company's growth prospects is an essential determinant of its future price performance.Comparing the current value of a company's valuation multiples, such as its price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF), to its own historical values helps ascertain whether its stock is fairly valued, overvalued, or undervalued, whereas comparing the company relative to its peers on these parameters gives a good sense of how reasonable its stock price is.As part of the Zacks Style Scores system, the Zacks Value Style Score (which evaluates both traditional and unconventional valuation metrics) organizes stocks into five groups ranging from A to F (A is better than B; B is better than C; and so on), making it helpful in identifying whether a stock is overvalued, rightly valued, or temporarily undervalued.PDD Holdings Inc. Sponsored ADR is graded C on this front, indicating that it is trading at par with its peers. Click here to see the values of some of the valuation metrics that have driven this grade.ConclusionThe facts discussed here and much other information on Zacks.com might help determine whether or not it's worthwhile paying attention to the market buzz about PDD Holdings Inc. Sponsored ADR. However, its Zacks Rank #5 does suggest that it may underperform the broader market in the near term.Zacks Names #1 Semiconductor StockIt's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report PDD Holdings Inc. Sponsored ADR (PDD): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks