They call it FUD: Fear, Uncertainty and Doubt. Chinese ride-hailing giant DiDi Global < NYSE:DIDI> has its share of problems, I’ll admit, but there’s also plenty of FUD surrounding DIDI stock.
Just to give you an example of this, reports circulated claiming that China’s Beijing city government is advising state-owned companies to invest in DiDi.
However, DiDi categorically denies this, saying that it “is currently actively and fully cooperating with the cybersecurity probe, foreign media reports that Beijing city government is coordinating companies to invest in it are incorrect.”
That’s only one example, and there’s another potentially false report which all current and prospective investors need to be aware of. The best policy is to be aware of the rumors, but then make your decisions based on what’s real, confirmed and relevant.
A Closer Look at DIDI Stock
Let’s start at the beginning for a quick review. DiDi’s initial public offering (IPO) took place on June 30, and the stock began trading at $16.65 per share.
The stock price stayed close to the $15 area for a couple of days after the IPO. After that, the sellers completely took control of the price action.
It was a cruel summer as DIDI stock tumbled below $10 in July, and then below $8 in August. In early October, the stock was still under $8.
Momentum-focused traders probably won’t like what they’re seeing with this stock. On the other hand, bona fide contrarians should take a different perspective.
Remember, contrarians believe in buying during peak pessimism. When negative rumors are swirling and a stock is unloved, that’s the time to get in.
And, consider this. If DIDI stock gets back to its IPO price, that would prove a 100% return on investment (ROI) if you bought at $8.
So, let’s see what’s being said about DiDi, and what investors should really pay attention to now.
Avoid the FUD Trap
Reportedly, it’s been claimed that DiDi co-founder and President Jean Liu told some close associates that she intends to step down from her lead role at the company.
It might be tempting to believe anything negative that’s being said about DiDi. The company is facing major challenges in 2021 due to cybersecurity reviews initiated by the Chinese government.
Yet, let’s not fall into the FUD trap here. For one thing, the sources alleging that Liu is stepping down are not named in the published report.
Anyone who panic-sold their DIDI stock shares due to this allegation, might be disappointed.
That’s because the company has strenuously denied the claims about an executive shakeup.
“Rumors about management changes are untrue and unsubstantiated. We strongly condemn those malicious and repeated rumors fabricated and distributed in certain media against Didi,” the company stated.
What To Be Concerned About
Now that we’ve addressed the FUD, let’s take up an issue that investors should pay close attention to.
There’s an old saying: you can’t argue with the numbers. In DiDi’s case, the number worth watching involved the company’s user growth – or lack thereof.
Unfortunately, it’s been reported that DiDi lost 30% of its daily users since July – which was when Chinese authorities began their crackdown on the company.
To be more precise, Didi’s average daily user count apparently declined from 15.6 million in June, to 10.9 million in August.
This decline was bound to happen, especially since Chinese regulators banned the company from signing up new customers.
Will this ban be permanent? There’s no way to know the answer to this question right now.
I will say this much, though: scary situations like this have a tendency to come and go. To put it another way: this, too, shall pass.
So, DiDi’s daily user loss is a major concern at the moment – but if the government someday lifts the aforementioned ban, then the recovery could be swift and powerful.
The Bottom Line
Make no mistake about it: DiDi has its share of challenges.
However, informed investors still must separate what’s only being alleged from what’s actually confirmed to be true.
One thing that’s definitely true is that DIDI stock has declined since its IPO.
This presents an opportunity for traders to ignore the FUD and consider an audacious investment which could offer 100% returns someday.
The stock market can be unpredictable, volatile, and sometimes totally nonsensical. InvestorPlace.com strives to cut through the noise and bring you information on what matters – and how it impacts your portfolio. We deliver thoughtful coverage on everything from stocks to cryptos to pre-IPO investments. So whether you live and breathe breaking stock news or expect your stocks to pay you, InvestorPlace.com has your back.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.
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DIDI shares were trading at $7.37 per share on Monday morning, down $0.21 (-2.77%). Year-to-date, DIDI has declined -47.88%, versus a 16.57% rise in the benchmark S&P 500 index during the same period.
About the Author: David Moadel
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets. More...
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