Shares of Pinduoduo (NASDAQ: PDD) were surging today, although there was no company-specific news on the stock. Instead, shares of the social commerce specialist seemed to be gaining on China’s announcement Monday that it would change its two-child policy to a three-child policy, encouraging larger families.
As a result, the stock finished the day up 11.6%.
As a social e-commerce business, Pinduoduo encourages shoppers to form buying groups to get discounts, a model that should naturally benefit from increased family sizes, which should also favor online shopping in general.
Chinese baby and maternity stocks soared on the news, and e-commerce peers like Alibaba Group Holding and JD.com also posted gains.
Last week, Pinduoduo posted another round of blistering growth in the first quarter with a 239% revenue hike to $3.4 billion, and a 31% increase in active buyers to 823.8 million. The company continued to post losses on the bottom line, but did narrow its adjusted loss by about 40% to $288.5 million.
Founded in 2015, Pinduoduo has quickly emerged as a challenger to Alibaba and JD.com, the two largest e-commerce platforms in China, thanks to its rapid growth and the popularity of its social commerce model. The stock has been a big winner on the market since its 2018 IPO, but is down about a third from its peak in February due to a broader rotation out of growth stocks .
The news about China’s three-child policy is a reminder that there’s still plenty of growth left in the Chinese market for companies like Pinduoduo.
10 stocks we like better than Pinduoduo Inc.
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now… and Pinduoduo Inc. wasn’t one of them! That’s right — they think these 10 stocks are even better buys.
*Stock Advisor returns as of May 11, 2021