January 31, 2025
We recently published a list of 12 Undervalued Cyclical Stocks to Buy Right Now In this article, we are going to take a look at where PDD Holdings Inc. (NASDAQ:PDD) stands against other undervalued cyclical stocks to buy right now.
On December 14, Brooke Roach, analyst at Goldman Sachs joined CNBC for an interview to discuss the firm’s outlook on consumer cyclicals for 2025. Roach mentioned that the firm is bullish on the outlook for consumer discretionary growth into 2025. She highlighted that the firm has a property consumer cash flow model, which considers various economist’s input regarding wages, healthcare, and essential expenditure cost. The model suggests that consumer spending will be strong in 2025, with discretionary cash flow growth of 5.2%. She explained that based on the research and findings the firm has a more optimistic view of consumer growth and thereby a bullish sentiment toward investment in apparel and accessories stocks in 2025.
READ ALSO: 12 Cheapest Stocks with Biggest Upside Potential and Top 10 Undervalued Tech Stocks to Buy According to Hedge Funds .
While talking about the themes that the firm has analyzed in 2024 and expects to continue this year, Roach mentioned that the consumer is very demanding and is seeking value. This means that they are looking for variety and innovation. Roach further elaborated that many of the top performers in the sector have been those companies that were able to provide the required innovation for the consumers. She also highlighted that heavy reliance on China as a sourcing partner has also been an issue for some of the companies. According to Roach, investors are looking for visibility into the sourcing plans, and companies that have successfully been able to present a plan for diversifying their sourcing have provided a more compelling investment case.
We have also covered consumer spending and its impact on the cyclical sector in the 8 Best Cyclical Stocks to Buy According to Hedge Funds . Here’s an excerpt from the article:
During strong economic periods, cyclical stocks tend to perform well because consumers have more disposable income to spend on luxury items, vacations, and home improvements. Conversely, during economic downturns or recessions, people often cut back on discretionary spending, leading to a decrease in demand for these goods and services.
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A close-up of a customer using the company's e-commerce platform whilst shopping online.
Forward P/E Ratio: 9.84
Earnings Growth: 12.68%
Number of Hedge Fund Holders: 78
PDD Holdings Inc. (NASDAQ:PDD) is another Chinese e-commerce company that owns and operates renowned platforms such as Temu and Pinduoduo. Its strategic edge lies in its group-buying model from small and medium businesses, which allows its listings to be cheaper than its competitors. Its brand Temu now operates in more than 50 countries globally and has become one of the fastest-growing platforms around the world.
GreenWood Investors in its Q4 2024 investor letter highlighted that PDD Holdings Inc. (NASDAQ:PDD) has become a fast-growing player in the industry and has achieved Gross Merchandise Value comparable to other giants such as Amazon and JD. However, it has done so in only one-third time compared to its competitors. The investment management firm remains confident in Temu and sees PDD Holdings Inc. (NASDAQ:PDD) as an indispensable player in the industry. During the fiscal third quarter of 2024, the company grew its top line by 44%, year-over-year. Despite competitive pressures, the company is focused on building a sustainable ecosystem through merchant support and safety updates. It is the best undervalued cyclical stock to buy right now.
GreenWood Investors stated the following regarding PDD Holdings Inc. (NASDAQ:PDD) in its Q4 2024 investor letter :
“Aside from transitory foreign exchange translation losses (as opposed to trading losses), the two other notable detractors from our portfolio were MEI Pharma and PDD Holdings Inc. (NASDAQ:PDD) in 2024.
Overall, PDD ranks 1st on our list of undervalued cyclical stocks to buy right now. While we acknowledge the potential of PDD to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than PDD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock .
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Disclosure: None. This article is originally published at Insider Monkey .
