DiDi stock forecast: can the share price recover?
The share price of the Chinese ride-hailing and mobility firm Xiaoju Kuaizhi, which operates under the brand DiDi Global, gained 16.9% over the past week. It remains down by 53.2% from the high it reached in the wake of its initial public offering (IPO) at the end of June, however.
DiDi is one of the Chinese technology companies that has come under intense scrutiny from authorities in China in recent weeks. Interventions have included fines as well as orders to suspend new app registrations. The regulators have even prevented certain types of firms from accepting foreign investment.
Given this background and level of volatility, is DiDi stock a buy or sell? How has the share price moved in the two months since its public listing?
In this article, we look at the company’s financial health, recent drivers for the share price and where analysts forecast the stock will move next.
Chinese regulators prevent DiDi expansion
DiDi operates ride-hailing services as well as providing taxi booking, chauffeur services and other forms of shared mobility. It also provides auto solutions, food delivery, freight and financial services. The company offers its app-based services across 17 countries in Asia Pacific, Central Asia, Russia, Latin America and Africa.
According to its IPO filing with the US Securities and Exchange Commission (SEC), the company’s total revenues for 2020 were RMB141.7bn ($21.6bn). That figure was down from the RMB154.8bn it posted for 2019 but up from its earnings of RMB135.29 in 2018.
DiDi had 377 million annual active users and 13 million annual active drivers in China for the 12 months ended 31 March 2021, with a daily average of 25 million mobility transactions in China for the three months ended 31 March.
The company said in the filing: “When we founded our business, we focused on building an on-demand shared mobility network that connects consumers with drivers. As we scale our network, we have been developing technology to solve problems of enormous complexity in real time and gaining operational expertise and consumer insights.”
It went on to add:
“Electric mobility is the next key component of our vision. Electric vehicles cost less to operate per kilometre travelled and make shared mobility more affordable and sustainable … Autonomous driving is the pinnacle of our design for future mobility.”
The company plans to invest in technology and artificial intelligence (AI) to drive the future of mobility and expand internationally.
Since DiDi’s $4.4bn IPO on the New York Stock Exchange (NYSE) on 30 June, however, the share price has plummeted in response to regulatory intervention in China restricting the company's operations. The stock launched at $14 a share and peaked at an intraday high of $18.01 on its first day of trading. On 2 July, the Cyberspace Administration of China (CAC) posted a message that DiDi was under a cybersecurity review and that the company must suspend new user registration in China during the review. The stock dropped by almost 20% in the wake of the announcement.
The share price dropped further after the CAC said on 9 July that 25 apps operated by DiDi in China for customers and drivers violated Chinese cybersecurity law in the way that they collected personal information. The CAC notified app stores to take down the apps to prevent them from being viewed or downloaded in China. The authorities required DiDi to “rectify the problem to ensure the security of users' personal information”.
DiDi said it “expects that the app takedown may have an adverse impact on its revenue in China”.
Other US-listed Chinese stocks are also facing increased regulatory scrutiny from China, which has caused their share prices to crash. Chinese e-commerce giant Alibaba (BABA), online grocery platform Pinduoduo (PDD) and online tutoring provider Gaotu Techedu (GOTU), are among stocks that have fallen sharply in recent months.
The iShares MSCI China exchange-traded fund (MCHI) – which investors use to gain broad exposure to fast-growing Chinese companies – has shed 13.9% year-to-date. Shares in Japanese investment firm SoftBank (9984) have fallen by more than 23% as its Vision Fund is Didi’s largest shareholder, with an ownership stake of over 20%.
The DiDi stock chart shows that shares reached an intraday low of $7.16 per share on 26 July in response to concerns that Chinese authorities could require the company to delist the stock from the US exchange. On 29 July, however, DiDi issued a statement denying a report in the Wall Street Journal that claimed the company was considering taking the company back into private ownership.
The share price moved up to close at $10.38 on 2 August, but it was unable to sustain the gains, and had dropped back to $7.20 by 19 August. The stock has since rallied, gaining 12.7% by 24 August when it closed at $8.70 per share. This followed a report in the UK’s Telegraph newspaper that DiDi has suspended plans to start operations in four UK cities for at least 12 months. The report cited concerns about the transfer of users’ personal data to China, which could have resulted in investigations similar to those conducted into the China-based based video platform TikTok.
What is the outlook for the DiDi share price forecast in light of these recent developments?
Didi stock forecast: can the stock rebound in the future?
On 26 July, analysts at Atlantic Securities downgraded DiDi stock from overweight to neutral, with a 12-month DiDi stock price prediction of $25 per share, according to MarketBeat. According to the website, other Wall Street analysts are yet to initiate coverage of the new stock.
Based on forecasting algorithms, prediction sites WalletInvestor and Gov Capital expect that the share price will drop to zero in November and October, respectively.
However, PandaForecast has a more bullish DiDi global stock forecast for 2021-2025. It predicts that the share price will end 2021 at $8.70, and then rise to $12.04 by the end of 2022. It sees the stock rising further in 2023, to end at $15.26. The site then suggests that DiDi will trade between $13.36 and $15.16 in 2024, before moving up from $13.67 in January 2025 to reach a high of $15.97 in November 2025.
None of this should be taken as investment advice. When considering analyst commentary or predictions from algorithm-based forecasting services, it’s important to keep in mind that their forecasts can be wrong. You should always do your own research to form a view of the asset’s outlook along with relevant market conditions.
FAQs
Is DIDI stock a good buy?
DIDI stock is currently subject to heightened volatility because of a crackdown on technology companies by financial regulators in China. Whether DiDi is a good buy for your portfolio depends on your risk tolerance and investment goals. You should always do your own research on a company before investing in the stock and never invest more than you can afford to lose.
Will the DIDI stock price go up?
The direction of the DIDI share price is uncertain as the price has been moving in response to Chinese government regulations rather than company fundamentals.
Markets in this article