Should you invest in Didi as it trims 28% debut gains?

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Written on Jul 1, 2021

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Ride-hailing company, Didi, started trading at the NYSE on Wednesday.
The stock popped 28.6% to a high of $18.01 after debuting at an IPO price of $14.00 per share.
DIDI shares trimmed the gains afterward to close at $14.14. Is it time to buy?

On Wednesday, China’s largest ride-sharing company Didi Global Inc. (NYSE:DIDI) went public via an NYSE IPO priced at $14.00 per share. The stock popped nearly 29% to trade at a high of $18.01 before pulling back to close at $14.14.

CNBC’s Mad Money host, Jim Cramer, said investors should buy as many Didi shares as possible once the company goes public. The company popularly referred to as the ‘Uber of China’ faced some anti-trust concerns, but Cramer remains optimistic it won’t have trouble with regulators.

Is DIDI stock a buy in July after IPO?

The ride-hailing market is one of the most exciting places to invest based on Uber Technologies Inc.’s (NYSE:UBER) and Lyft Inc.’s (NASDAQ:LYFT) success. Based on Wednesday’s closing price of $14.14, Didi’s market value rose to approximately $70 billion. The company bought Uber’s China-based subsidiary in 2016 to become the dominant player in the Asian market.

Didi’s top line will grow as it expands its services in the country. Given China’s massive population of nearly 1.4 billion people, the upside potential is enormous. Therefore, Wednesday’s opening pullback could be an opportunity to invest in DIDI shares.

Technical overview: why buy DIDI stock in Q3 2021?

Technically, Didi stock appears to be trading closer to oversold conditions after Wednesday’s post-IPO pullback. At Wednesday’s closing price of just $14.14, the only place to go is up unless the market deems the shares overvalued at the IPO price.

Investors can target short-term rebound profits at approximately $14.71 or higher at $15.31 for extended gains. If DIDI stock falls below the IPO price of $14.00, $13.76 becomes an immediate support level. Extended declines could also find support at $13.15.

Bottom line: the catalyst for buying DIDI shares now

In summary, DIDI stock seems to be trading just above the IPO price, leaving a lot of room to run. Moreover, the company’s long-term future is exciting, given the potential for growth in China and the rest of Asia.

Therefore, it would be best to buy DIDI shares now before going on a significant rally in the coming weeks.