Tag Archives: AMZN

Didi Stock Forecast for 2025: High-Risk Profit Potential

Imagine Uber, but with three times the drivers worldwide and 457 million more users – that’s Didi Global Inc. (NYSE: DIDI).

And the Didi stock forecast for 2025 looks sunny, despite some short-term hiccups. Let’s talk about why Didi could eventually dominate the global rideshare industry.

moneymorning.com/wp-content/blogs.dir/1/files/2021/08/didi-330-300×200.jpg 300w, moneymorning.com/wp-content/blogs.dir/1/files/2021/08/didi-330-75×50.jpg 75w” data-lazy-sizes=”(max-width: 330px) 100vw, 330px” title=”” data-lazy-src=”https://moneymorning.com/wp-content/blogs.dir/1/files/2021/08/didi-330.jpg” />moneymorning.com/wp-content/blogs.dir/1/files/2021/08/didi-330-300×200.jpg 300w, moneymorning.com/wp-content/blogs.dir/1/files/2021/08/didi-330-75×50.jpg 75w” sizes=”(max-width: 330px) 100vw, 330px” title=”” />

The Chinese company that hosts 15 million drivers to its 550 million users (compared to Ubers 5 million drivers and 93 million users) just went public and is an intriguing, yet risky stock.

Where Didi’s stock is risky, it certainly makes up for it in potential reward. You could take advantage of the upside while avoiding market consequences the ongoing U.S.- China tiff.

Here’s the scoop on Didi stock and where it’s headed in the next five years…

What Happened to Didi Stock After Its IPO?

The Chinese ridesharing company went public June 30, and after selling 137 million American Depository Shares (ADS), the IPO raised $4.4 billion and proved on the high end of its expected range of $14.

Investors went all in on the IPO, forcing the company to increase the deal size. In turn, it made Didi the biggest U.S. share sale by a Chinese company since Alibaba Group Holdings Ltd. (NYSE: BABA) raised $25 billion in 2014.

For reference, the Alibaba IPO was priced at $68 and went up 232% in a short time following its U.S. IPO. Today, it trades at $226, and you can expect similar gains from Didi.

The stock quickly dropped after its IPO; however, in this day in age, that’s not nearly enough reason to write it off.

To better understand the risks involved in Chinese stocks, you need to understand how it is we’re able to invest in them.

Problems Investing in Chinese Stocks

Foreigners aren’t legally permitted to own shares of Chinese companies listed on Chinese exchanges, but these companies will want exposure to American markets.

The Chinese government fears outside influence over its economy and population. This is why regulators have specific issue with outsiders owning stake in media or telecom ventures, which are highly controlled and monitored.

This leads us to the loophole that makes Chinese stocks different. It allows companies to tap into the trillions of dollars in capital flowing through Wall Street. By listing shares on foreign exchanges like the New York Stock Exchange and Nasdaq, foreigners, especially Americans, can buy and sell shares every day.

In order to do so, Chinese companies transfer business to what’s basically an offshore account. Companies can work around the Chinese government by establishing variable interest entities (VIEs) in “offshore” locations like the Cayman Islands.

VIEs then contract with the home-based company to transfer control to its VIE, which then seeks to go public on a forging exchange. Some companies even list on multiple exchanges.

This process is no secret to Chinese officials. Even though it’s obviously evading the Communist Party’s rules, regulators turn a blind eye because the establishment understands and welcomes the benefits of these transactions.

Meanwhile, U.S. regulators like the Public Company Accounting Oversight Board (PCAOB), which his directly overseen by the U.S. Securities Exchange Commission, looks the other way.

And that brings us to why Didi could be a stock with gains similar to Alibaba.

Didi Stock Forecast for 2025

Didi has everything it takes to be on top of not just the Chinese rideshare sector, but China’s economy. It has more in the pipeline than growing outside of China, and it could potentially be game-changing.

The company made future trends its priority, focusing on artificial intelligence (AI), machine learning (ML), and Big Data, all working together to create a smarter fleet. Didi could potentially be in command of an entire transportation ecosystem. It’s already bought Uber in China and is showing no signs of slowing down.

It’s focusing on groundbreaking, industry revolutionizing projects.

The company is worth about $68 billion right now, but it could be worth upward of $230 billion by 2025.

While its IPO didn’t go as planned, it’s still showing signs of life. Because it’s controversial, hardly any analysts cover the stock. But the few that do have set a 12-month target price between $18 to $20. That’s a potential 160% return.

The way Didi is expected to grow, its stock could have returns similar to Amazon (NASDAQ: AMZN) within the next five years. Analysts give the stock a minimum price target of $161 by 2025.

Those are some serious gains, but again, not without risk.

Follow Money MorningonFacebook and Twitter.

Join the conversation. Click here to jump to comments…

4 Ways Walmart's Following Amazon's Playbook

Over the last 25-plus years, Amazon (NASDAQ:AMZN) has transformed from merely a retail company to a collection of services for merchants, enterprises, and consumers. That’s a playbook its competitors are eager to follow, and Walmart (NYSE:WMT), largely following in Amazon’s footsteps, has dramatically expanded its operations over the last couple of years.

Here are four ways Walmart’s copying Amazon’s playbook.

Three Walmart boxes moving down a conveyor belt.g.foolcdn.com/image/?url=https%3A//g.foolcdn.com/editorial/images/640846/walmart-box-fulfillment.jpg&w=1000&op=resize 1000w, g.foolcdn.com/image/?url=https%3A//g.foolcdn.com/editorial/images/640846/walmart-box-fulfillment.jpg&w=2000&op=resize 2000w”/>

Image source: Walmart.

Fulfillment

Walmart launched Walmart Fulfillment Services (WFS) at the start of 2020. The service gives third-party merchants on Walmart’s marketplace access to Walmart’s fulfillment network in order to store, pick, pack, and ship items to customers. Walmart also handles returns and customer service for its WFS merchants. It’s an exact copy of Amazon’sFulfillment by Amazon (FBA) service.

Former Amazon CEO Jeff Bezos said the FBA program is a big reason third-party merchants’ share of Amazon’s total merchandise sales grew from 3% in 1999 to 58% in 2018. But he also said investing in the service was no sure bet. In his 2018 letter to shareholders, Bezos wrote:

We had to continue investing significantly over time as we experimented with different ideas and iterations. We could not foresee with certainty what those programs would eventually look like, let alone whether they would succeed.

Walmart’s in the early stages of WFS. It’s investing significantly, and it’s seeing good results so far. During Walmart’s second-quarter earnings call, CEO Doug McMillon said WFS is on track to reach double-digit penetration of its gross merchandise volume by the end of the year. Walmart announced plans to accelerate its capex spending earlier this year with a focus on its supply chain, opening more opportunities for WFS partners. So far, it’s working out — but, like FBA, it’s still no sure bet.

Advertising

Walmart rebranded and expanded its advertising business at the start of 2021 under the new name Walmart Connect. The service aims to leverage Walmart’s 150 million weekly customers across its physical stores and websites to provide unique advertising capabilities for merchants, brands, and other marketers.

Walmart has always had an advertising business, focused primarily on in-store ads like endcaps, but Amazon’s success with promoted listings and brand banners in its search results may have inspired the rebranding and bigger focus on the e-commerce channel opportunity. Amazon grew its advertising business from less than $3 billion in 2016 to more than $28 billion in the last four quarters.

Walmart’s advertising business is far smaller than Amazon’s, but it’s showing good progress. Sales increased 95% in the second quarter, and active Walmart Connect advertisers increased 170%. Keeping up that pace could help Walmart turn its e-commerce operations profitable while giving it extra cash flow to invest in the growth of other services.

A Walmart employee putting bags into the back of a minivan.g.foolcdn.com/image/?url=https%3A//g.foolcdn.com/editorial/images/640846/walmart-online-grocery-pickup-placing-order-in-vehicle.jpg&w=1000&op=resize 1000w, g.foolcdn.com/image/?url=https%3A//g.foolcdn.com/editorial/images/640846/walmart-online-grocery-pickup-placing-order-in-vehicle.jpg&w=2000&op=resize 2000w”/>

Image source: Walmart.

Omnichannel services

Walmart’s most recent efforts to expand its services include offering its omnichannel sales technology and delivery services to other retailers.

Over the last few years, Walmart has built out its omnichannel capabilities. The highlight is its curbside grocery service (which now includes more general merchandise). Curbside pickup is now available at over 3,900 Walmart stores in the U.S. Walmart’s also rapidly expanded its delivery network to offer same-day delivery on items from over 3,250 of those stores.

Now, Walmart is offering access to its software to facilitate similar online orders for other merchants and retailers, as well as opening its delivery network to other local businesses.

While there’s no exact analog within Amazon, the company follows the playbook Amazon perfected. It builds something for its own internal operations, and then it uses its scale to offer it at a relatively low price to other businesses. The marginal profits from following that model can be substantial, since many of the operating costs are already baked into the larger retail business.

Walmart+ vs. Prime

Where Amazon really stands out from its competitors is its Prime membership program. The e-commerce giant counts over 200 million global subscribers, and that’s a big reason Amazon’s merchant services, like advertising and FBA, have been so successful. Prime drives customer loyalty to Amazon.

Walmart has been working on a Prime competitor for years, and its latest iteration is Walmart+. Unfortunately, the success of Walmart+ is also a big uncertainty. While Walmart initially signed up millions of customers to the program focused on unlimited grocery delivery and fuel discounts, it’s having a hard time keeping them engaged and subscribed.

That’s a real problem for Walmart, as it needs to build both sides of its network — merchants and customers — to have Amazon-level success with e-commerce. If it can’t attract enough customers to Walmart.com, the value of its fulfillment and advertising services is diminished. And with the heavy capital investment in building out the fulfillment network, it could be a big drain on cash and operating expenses if Walmart doesn’t have enough demand to utilize its full capacity.

Amazon won’t have any qualms if Walmart or other competitors want to copy its playbook. Building an organization as large as Amazon is a lot harder than it looks.

This article represents the opinion of the writer, who may disagree with the official recommendation position of a Motley Fool premium advisory service. Were motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.