Airbnb and DoorDash sink as analysts turn skeptical of massive IPO rallies

airbnb ipo nasdaq
The Airbnb logo is displayed on the Nasdaq digital billboard in Times Square in New York on December 10, 2020. – Home-sharing giant Airbnb was set for its Wall Street debut Thursday with a whopping $47 billion valuation amid a feverish rush for new shares in companies adapting to lifestyle changes imposed by the coronavirus pandemic. (Photo by Kena Betancur / AFP) (Photo by KENA BETANCUR/AFP via Getty Images)

  • Airbnb and DoorDash shares fell on Monday after analysts downgraded the newly public companies’ stock.
  • Both firms surged last week as outsized demand pushed prices well above their IPO levels.
  • Gordon Haskett downgraded Airbnb to “underperform” from “buy,” and expects shares to fall roughly 20% from current levels.
  • DA Davidson lowered DoorDash to a “neutral” rating from “buy,” adding that the company’s stock price leaves little room for future error.
  • Watch DoorDash trade live here.
  • Watch Airbnb trade live here.

Airbnb and DoorDash both tumbled on Monday as analysts downgraded ratings following both firms’ colossal public-market debuts.

Airbnb sank as much as 10.1%, while DoorDash plunged 13.6% at intraday lows. The two companies collectively raised $6.7 billion in back-to-back initial public offerings last week, capping a record year for IPOs. Massive demand for the firms’ shares fueled massive gains in their first days of trading, but analysts covering the companies are growing concerned that the stocks climbed above rational trading levels. 

Gordon Haskett changed its rating for Airbnb to “underperform” from “buy” on Monday, eschewing the bullish outlook he held for the firm just one week ago. The home-sharing company’s valuation is “more than stretched” after more than doubling in its Thursday debut, the firm said. Airbnb also trades at two times its estimated gross bookings value, where the average online travel group trades at a 0.6 multiplier, Gordon Haskett said.

The firm lifted its price target to $103 from $77, but the level still implies a roughly 20% drop from current levels.

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Separately, DA Davidson downgraded DoorDash to “neutral” from “buy” following the firm’s 86% opening rally. The firm still feels DoorDash deserves to trade at a premium multiple due to its leadership in the food-delivery sector but noted its stock price leaves little room for error.

DA Davidson boosted its price target for DoorDash to $150 from $93. That level implies a slight drop from the stock’s current price. No other analysts have initiated ratings on DoorDash shares. 

Despite the shift in analyst sentiments and Monday losses, both companies still trade well above their IPO prices. Their rallies have fueled new scrutiny of market optimism, with some strategists concerned that the outsized demand for new issuances is a symptom of dot-com-era greed.

DoorDash traded at $157.51 as of 3:10 p.m. ET Monday. Airbnb traded at $129.33.

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‘It’s silly season’: Airbnb and DoorDash’s IPO rallies signal return of dot-com-era greed, strategists say

Airbnb IPO
The Nasdaq digital billboard in Times Square in New York on December 10.

  • Airbnb’s and DoorDash’s massive debut rallies suggest the IPO market is getting ahead of itself, top strategists said Thursday.
  • Airbnb spiked 115% when it began trading publicly for the first time on Thursday. DoorDash closed 86% higher in its Wednesday debut.
  • The first-day climbs revealed “euphoria and greed” last seen in the market during the dot-com bubble of the late 1990s, Paul Schatz, the president and chief investment officer of Heritage Capital, said.
  • “It’s silly season,” and investors need to differentiate between “a great company and a great price or value,” Rich Steinberg, the chief market strategist at the Colony Group, told Business Insider.
  •  Visit the Business Insider homepage for more stories.

Airbnb’s and DoorDash’s colossal post-IPO pops reveal unsustainable euphoria in the stock market, top strategists said.

Some of the year’s biggest initial public offerings took place this week, adding to an already record year for market debuts. DoorDash soared 86% when it began trading on Wednesday after raising $3.2 billion through its offering the day prior. Airbnb leaped 115% when it began trading Thursday afternoon, pushing its market cap above $100 billion and raising $3.5 billion.

The first-day rallies, while extraordinary, show “euphoria and greed” that’s likely not been seen in the stock market since the dot-com bubble of the late 1990s, Paul Schatz, the president and chief investment officer of Heritage Capital, said. Many investors are rushing to the new stocks, wanting to get in at any price, but such massive IPO bounces usually give way to similarly outsize losses, he added. 

“It’s silly season,” Rich Steinberg, the chief market strategist of the Colony Group, told Business Insider. “Investors need to distinguish the difference between a great company and a great price or value.”

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Both strategists attributed some of that euphoria to the near-zero interest rates expected to stay put over the next three years. The Federal Reserve’s plan to hold rates at record lows leaves investors with fewer places to put their money, as the policy suppressed Treasury yields early in the pandemic. The Fed’s backstop of the corporate credit market placed similar pressure on bond yields.

The combination of near-zero interest rates, a “tsunami of liquidity,” and hundreds of billions in unallocated investor cash fueled the two buying sprees, Schatz said.

The week’s booms might be only the start. Investors could face “complete and utter mania” across the IPO market in the first half of 2021 as more firms look to tap the market while demand remains strong, the Heritage Capital president said. Investors should avoid trying to time such volatile debuts and instead be patient until stock prices better reflect firms’ fundamentals, he added.

“Being the last guy buying the opening of a hot IPO, at the height of this speculative excess in some of these names, typically does not end well,” Steinberg said. 

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DoorDash surge makes the delivery company more valuable than many of the franchises it delivers for

DoorDash Biker
DoorDash Biker

  • The 86% surge in DoorDash’s first day of trading on Wednesday sent the delivery company’s valuation soaring to $72 billion. 
  • That valuation makes DoorDash more valuable than many of the companies it delivers for, including Chipotle, Taco Bell, KFC, and Pizza Hut combined.
  • The delivery company is now worth even more than all but 2 long-haul delivery companies in the railroad space, and is just a 7% move away from eclipsing FedEx in value.
  • Watch DoorDash trade live here.

DoorDash, the last-mile delivery company that posted a strong IPO debut on Wednesday, is now worth more than many of the companies it makes deliveries for. 

On Wednesday, DoorDash surged 86% in its first day of trading, vaulting its market valuation to $72 billion.

That surge makes DoorDash more valuable than the likes of Chipotle, Taco Bell, KFC, and Pizza Hut combined.

Chipotle has a market valuation of $38 billion, while Yum Brands, parent company to Taco Bell, KFC, and Pizza Hut, sports a market valuation of $32 billion.

Other popular fast food companies that DoorDash delivers for and has surpassed in market valuation include Domino’s, Burger King, and Wendy’s

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According to DoorDash, some of the top 10 food items delivered by the company in 2020 include tacos, burritos, pizza and sushi. 

DoorDash’s market valuation is also competing with another group of well-established delivery companies that focus on long-haul, cross country deliveries: railroads.

As of Wednesday’s close, DoorDash is now more valuable than all but two publicly traded railroad companies. The firm’s $72 billion valuation has surpassed CSX Corporation’s $69 billion valuation, as well as Norfolk Southern Corporation’s valuation of $60 billion. 

The next delivery company DoorDash is close to surpassing in market value? FedEx. A 7% surge higher from Wednesday’s close would propel DoorDash to overtake FedEx’s current market valuation of $77 billion.

In the first nine months of 2020, DoorDash recorded $1.9 billion in revenue and is not yet profitable, while FedEx notched $54 billion in revenue and $1.2 billion in profits over the same time period.

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DoorDash makes trading debut 78% above IPO price

DoorDash delivery driver courier brooklyn bike
  • DoorDash commenced public trading on Wednesday, opening at $182, which was 78% above its initial public offering price.
  • The food-delivery company raised roughly $3.4 billion with its initial public offering after pricing shares at $102 each on Tuesday.
  • The IPO kicks off a slew of debuts slated for December, including offerings from Airbnb and Wish-parent ContextLogic.
  • DoorDash trades on the New York Stock Exchange under the ticker “DASH.”
  • Watch DoorDash trade live here.

DoorDash commenced public trading on Wednesday, opening at $182, which was 78% above its initial public offering price. The stock is listed on the New York Stock Exchange.

The food-delivery company raised roughly $3.4 billion in its initial public offering, selling shares at $102 each. The final pricing exceeded its previously expected range of $90 to $95 per share, and gave DoorDash a valuation of roughly $34.2 billion. That sum handily surpasses the $15 billion valuation it achieved in the private market earlier this year.

DoorDash’s IPO marks one of the year’s biggest offerings and caps a historic year for public debuts. US listings already raised a record $156 billion in 2020, according to Bloomberg data. Airbnb and Wish-parent ContextLogic are still poised to enter the market this month, with the former set to begin trading on Thursday.

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Overwhelming investor demand placed shares on track to open as high as $195 before trading began. Its ultimate opening level of $182 is more than double the $75 to $85 range DoorDash expected to price shares as recently as Thursday.

DoorDash’s debut establishes it as the highest-valued food-delivery company. The firm trades under the ticker “DASH.” 

While the coronavirus slashed sales across the US economy, stay-at-home orders led DoorDash to thrive through the pandemic. Third-quarter revenue leaped 268% from the year-ago period as a larger portion of Americans turned to food delivery services. 

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The distribution of a coronavirus vaccine might cut down on deliveries, but soaring COVID-19 cases and reinstated lockdown measures stand to keep the company’s hot streak alive into 2021.

DoorDash climbed as much as 92%, to $195.50, on Wednesday. Goldman Sachs and JPMorgan served as the IPO’s lead underwriters.

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DoorDash prices IPO at $102 per share, will raise $3.4 billion

doordash delivery driver
  • DoorDash priced its shares at $102 apiece on Tuesday ahead of its IPO, CNBC’s Leslie Picker reported. That comes in well above the expected range.
  • The offering is expected to raise $3.4 billion, and it gives the food-delivery company a valuation of $32.4 billion.
  • DoorDash lifted its pricing range on Friday to $90 to $95, from $75 to $85. Its new pricing sets the company up to be one of the year’s biggest debuts.
  • DoorDash is set to trade on the New York Stock Exchange under the ticker “DASH.”
  • Visit the Business Insider homepage for more stories.

DoorDash priced its shares at $102 each on Tuesday ahead of its highly anticipated initial public offering, CNBC’s Leslie Picker reported. The final pricing comes in well above the expected range.

That pricing will allow the company to raise $3.4 billion when it begins trading on Wednesday, according to a regulatory filing. It also gives the firm a $34.2 billion valuation, based on common stock outstanding, and $38.7 billion on a fully-diluted basis. It will mark one of the year’s largest market debuts.

The pricing brings DoorDash well above the roughly $15 billion private valuation it achieved earlier in 2020, which was already a major increase from the $1.4 billion it was worth in 2018.

DoorDash is poised to become the highest-valued food-delivery company when it debuts on the New York Stock Exchange. The company is set to trade under the ticker “DASH.”

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DoorDash lifted its IPO price range on Friday to $90 to $95, from $75 and $85 per share. Its latest target sets it up to be among the year’s five largest offerings.

IPOs from DoorDash, Airbnb, Wish-parent ContextLogic, and others are set to drive the busiest December on record for public offerings. US listings have already raised a record $156 billion in 2020, according to Bloomberg data, partially fueled by the year’s blank-check frenzy.

Goldman Sachs and JPMorgan will serve as the offering’s lead underwriters.

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DoorDash is the ‘most ridiculous IPO of 2020’ and holds no value beyond bailing out private investors, a veteran equities analyst says

doordash dasher courier delivery 6
  • DoorDash is set to go public on Tuesday, but one stock analyst cautioned investors against buying into the food-delivery startup.
  • “We think this proposed public equity offering holds no value, $0, beyond bailing out private investors before unsuspecting public investors realize ,” David Trainer, the founder and CEO of New Constructs, said in an email.
  • Trainer said he was concerned that it took a global pandemic for the company to turn a profit.
  • Though revenue grew by 268% year-over-year in the third quarter, DoorDash might not be profitable in the future, especially after a coronavirus vaccine sends more people back to restaurants, Trainer said.
  • Visit Business Insider’s homepage for more stories.

DoorDash’s initial public offering “holds no value,” and the company may never be profitable, said David Trainer, the CEO and founder of New Constructs.

The food-delivery startup upped its IPO price range to $90 to $95 a share in a filing on Friday after initially targeting $75 to $85. The new target means DoorDash is now seeking to raise as much as $3.1 billion in its public debut on Tuesday.

It could be one of the largest US tech IPOs of the year, though Trainer branded it “the most ridiculous IPO of 2020.”

The veteran Wall Street analyst said that DoorDash’s last private valuation was only $16 billion and that its pre-IPO stage reflected the “overblown fervor of the work-from-home theme.”

“We think this proposed public equity offering holds no value, $0, beyond bailing out private investors before unsuspecting public investors realize the business is not viable in its current form,” he said in an email.

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Trainer added that the company would need to grow its share of the competitive global food-delivery app market to over 56% from roughly 16% over the trailing 12 months to justify its valuation.

DoorDash’s revenue grew by 268% year-over-year in the third quarter of 2020, but Trainer cautioned investors against expecting further growth, especially if a swiftly deployed coronavirus vaccine sends people back into restaurants.

“It took a global pandemic to drive the firm’s one quarter (ended June 30, 2020) of GAAP profitability. The firm has not been profitable since, and we think it may never be,” he said.

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“Investors should take DoorDash’s GAAP numbers with a grain of salt,” Trainer added. “The company disclosed a material weakness in its internal control over financial reporting in its S-1. This disclosure means DoorDash didn’t have adequate technology and processes in place to ensure the accuracy of its financial statements and increases the odds that DoorDash will need to restate its financials in the future.”

Trainer also pointed out that DoorDash publicly filed for its IPO on November 13, a few days after Pfizer announced its vaccine was found to be over 90% effective at preventing COVID-19.

“We think DoorDash’s current investors and bankers recognize that the window of opportunity to IPO this terrible business closes quickly when the threat of COVID-driven lockdowns no longer drives growth in food delivery demand,” the analyst said.

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