Didi Global Stock: Can the “Chinese Uber” Overcome the Odds?
Didi Global stock investors have been watching their shares sink in value since the company went public in June. The Chinese ride-sharing company has lost nearly half its value since it held its IPO.
Several big developments impacting the company’s future have led to the declining share price value. For example, several Chinese stocks are falling due to increasing regulatory concerns. These concerns are particularly affecting the tech industry. To make matters worse, the ride sharing tech company was one of the main targets of the regulatory crackdown.
Immediately following Didi’s IPO, the Cyberspace Administration of China (CAC) launched an investigation. The CAC told Didi Global they must remove the app, and no new customers will be allowed to sign up for its services. The reason being worries over data privacy.
As a result of the investigations, Didi’s stock price immediately dropped over 20%. Once crowned the “Uber of China,” Didi Global (NYSE: DIDI) appears at odds with government officials.
Can Didi Global turn it around? Let’s take a closer look at how that can happen…
Trouble Brewing for Didi Global?
Didi Global, which went public less than three months ago, is remaining in the global headlines. Although the Chinese ride sharing company is trending, it appears to be for all the wrong reasons.
- China Tech Regulations. The tech crackdown in China is one of the most significant headlines affecting Didi Global. The new regulations are to counter “internet culture” and false information. In addition, the administration is trying to prevent other countries from accessing Chinese citizen’s data.
- Data Privacy Concerns. Didi stock shares fell over 20% following reports the company was under investigation. Similarly, A Wall Street Journal report claims the company was warned before going public over its network security. The Didi investigation is part of a bigger plan to control consumer data. Ultimately preventing it from leaking out of the country.
- Tightened Ride Sharing Rules. Chinese officials are also proposing new ride sharing measures. The plan is to encourage workers’ fair pay. The new rules also include a cap on driver fees. In addition, the measures include requiring enough rest to prevent overworking.
In short, Didi Globals’ ability to generate earnings may be at risk. As a result, lower earnings generally mean less returns for shareholders. This can put pressure on Didi Global’s stock price due to lower earnings potential.
Is There Anything That Can Turn Didi Around?
With all of the negative news surrounding Didi stock, investors are left wondering… Is it possible for the company to turn things around?
Despite the company’s poor outlook so far, there are a few ways it can turn things around.
- Compliance. First, Didi Global will have to follow the new regulations. The company will be subject to several new laws and regulations. The first step will be to re-launch the Didi Global app in China. After being removed from the app store due to privacy concerns, Didi must agree with the Chinese government.
- Going Global. Despite the negativity around the company in China, it still operates in 17 countries. Furthermore, information from China shows Didi Global is still growing. The company saw 13.1% growth in orders last month. If Didi continues growing in China and expanding into new markets, it can regain some losses.
- Autonomous Vehicles. One of the main objectives of China’s ‘Made in China 2025’ plan is to promote self-driving technology. The country shows how they can increase the production of AV to nearly 50% of total vehicles sales by 2025. This is a big opportunity for Didi to capture as estimates show the self driving car market to be worth $62 billion by 2026.
There are several “ifs” surrounding Didi Global and how it will deal with China’s new regulations. Most importantly, Didi must please government officials by following the new rules.
Didi Global Stock Forecast: What Investors Can Expect In the Future
Didi global stock had high hopes from investors. The company was the second-largest Chinese company to list in the United States. However, with Didi’s stock price down more than 47%, investors are questioning the company.
It isn’t the first time we’ve seen regulations from China crush a company’s stock price. It’s happened with other China tech giants such as Alibaba (NYSE: BABA).
Let’s assume the company can overcome the new laws and continue to grow in a large market. Didi shares have the potential to recover in this case. Also, if Didi can live up to its name and expand globally, it will be able to overcome some of the losses.
Consumer privacy, on the other hand, is a touchy subject. When a company loses its customers’ trust, it can be difficult to regain. Let’s say Didi Global was dishonest about the privacy of its customers’ data. In that case, investors should brace themselves for more volatility.
Furthermore, both ride sharing and self-driving technology are facing stiff competition. Companies such as Uber (NYSE: UBER) are expanding as well.
For Didi Global stock to bounce back, it will have to regain shareholder confidence first. This means proving the company is open and still growing.
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About Pete Johnson
Pete Johnson is an experienced financial writer and content creator who specializes in equity research and derivatives. He has over ten years of personal investing experience. Digging through 10-K forms and finding hidden gems is his favorite pastime. When Pete isn’t researching stocks or writing, you can find him enjoying the outdoors or working up a sweat exercising.