DiDi Global (DIDI -5.15%), the largest ride-sharing company in China, went public at $14 per share on June 30. The stock opened at $16.65, but lost its momentum and closed at just $14.14 per share. DiDi's stock rebounded the next day, but it seems like the "Uber (UBER -2.94%) of China" might not fare much better than Uber -- which dropped below its IPO price on its first trading day in 2019.
Uber notably gained a stake in DiDi after selling its Chinese operations to DiDi five years ago, but it sold a "small portion" of its shares earlier this year. Uber now trades about 10% above its IPO share price of $45, but it took more than a year for its stock to stabilize above that level. Will DiDi suffer the same fate, or will it fare better than its overseas counterpart?
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How fast is DiDi growing?
DiDi was founded in 2012. It merged with its biggest rival Kuadi Dache in 2015, then acquired Uber's Chinese business in 2016. Those two moves consolidated its position as China's market leader.
DiDi also expanded overseas by buying stakes in Lyft and Singapore's Grab; acquiring Brazil's 99 Taxis; and expanding its namesake service across Japan, Australia, New Zealand, Canada, Latin America, South Africa, Russia, and Eurasia. In addition, DiDi extended its reach with bike-sharing services, vehicle leasing services, freight services, and an overseas food delivery platform.
Today DiDi operates in nearly 4,000 cities, counties, and towns across 15 countries. It serves more than 493 million annual active users and processes 41 million average daily transactions.
However, DiDi still generated 94% of its revenue from its Chinese mobility services (which include its ride-hailing and ride-sharing services) in 2020. Less than 2% came from its international business, while the remaining 4% came from "other initiatives" like bike-sharing and auto leasing services.
How does that compare to Uber?
Uber is more diversified than DiDi in terms of its platforms and geographic reach. Uber generated 55% of its revenue from its mobility segment last year, 35% from Uber Eats' delivery services, and 9% from its freight services. The remaining sliver came from its self-driving advanced technologies group (ATG), which it agreed to divest last December.
During the year, Uber generated 59% of its revenue from the U.S. and Canada, 19% from its EMEA (Europe, Middle East, and Africa) region, 12% from Latin America, and the remaining 10% from its Asia-Pacific region. It previously divested its operations in several markets -- including China, Russia, and Southeast Asia -- to streamline its business and focus on its strongest markets.
Which company is growing faster?
DiDi's revenue rose 14% in 2019, but it declined 8% to 141.7 billion yuan ($21.6 billion) in 2020 as the pandemic kept more people at home. Its Chinese mobility revenue dropped 10% last year, but the growth of its international and other initiatives segments partly cushioned the blow.
In the first quarter of 2021, DiDi's revenue soared 106% year over year to 42.2 billion yuan ($6.4 billion), thanks to an easy comparison to the pandemic's initial impact a year ago. Its Chinese mobility revenue more than doubled as its other two businesses continued to grow.
DiDi has been unprofitable over the past three years, and it posted a narrower loss in 2019 and a wider loss in 2020. Yet it squeezed out a net profit of 5.5 billion yuan ($837 million) in the first quarter of 2021.
Uber's revenue rose 25% in 2019, fell 14% to $11.1 billion in 2020, then dropped 11% year over year to $3.2 billion in the first quarter of 2021. But excluding an accrual related to higher wages and other benefits for U.K. drivers, its revenue would have risen 8% year over year.
Uber generated a slim profit in 2018, but it turned unprofitable in 2019 and only posted a slightly narrower net loss in 2020. In the first quarter of 2021, its net loss narrowed year over year from $2.9 billion to $108 million -- but that figure was significantly inflated by the $1.6 billion sale of its ATG unit.
Which stock is cheaper?
DiDi was valued at $68.5 billion after its market debut, so it trades at just over three times last year's sales. Uber has a market cap of $95 billion, which gives it a much higher trailing price-to-sales ratio of 9.
But DiDi is cheaper for three reasons. First, investors are afraid that it could face an antitrust probe, as Alibaba recently did, over its market dominance. Second, its overseas expansion could flop against entrenched regional leaders. Lastly, many Chinese tech stocks still face delisting threats in the U.S.
But Uber might not deserve its higher valuation. It faces intense competition and ongoing pressure to raise wages in its biggest markets, and Uber Eats' losses remain a dead weight on its bottom line.
Should you buy DiDi instead of Uber?
I'm not a big fan of either stock right now, but DiDi seems like a better investment for investors who can look past the near-term noise about tighter regulations in China and delisting threats. If DiDi overcomes these challenges, it could have more upside potential than Uber.
