Share This Article

Facebook LinkedIn
Twitter Reddit
Print Email
Pinterest Gmail
Yahoo
Money Morning
×
  • Invest
    • Best Stocks to Buy
    • Stock Forecasts
    • Stocks to Sell Now
    • Stock Market Predictions
    • Technology Stocks
    • Best REITs to Buy Now
    • IPO Stocks
    • Penny Stocks
    • Dividend Stocks
    • Cryptocurrencies
    • Cannabis Investing
    • Angel Investing
  • Trade
    • How to Trade Options
    • Best Trades to Make Now
    • Options Trading Strategies
    • Weekly Trade Recommendations
  • Retire
    • Income Investing Guide
    • Retirement Articles
  • More
    • Money Morning LIVE
    • Special Investing Reports
    • Our ELetters
    • Our Premium Services
    • Videos
    • Meet Our Experts
    • Profit Academy
Login My Member Benefits Archives Research Your Team About Us FAQ
  • Invest
    • Best Stocks to Buy
    • Stock Forecasts
    • Stocks to Sell Now
    • Stock Market Predictions
    • Technology Stocks
    • Best REITs to Buy Now
    • IPO Stocks
    • Penny Stocks
    • Dividend Stocks
    • Cryptocurrencies
    • Cannabis Investing
    • Angel Investing
    ×
  • Trade
    • How to Trade Options
    • Best Trades to Make Now
    • Options Trading Strategies
    • Weekly Trade Recommendations
    ×
  • Retire
    • Income Investing Guide
    • Retirement Articles
    ×
  • More
    • Money Morning LIVE
    • Special Investing Reports
    • Our ELetters
    • Our Premium Services
    • Videos
    • Meet Our Experts
    • Profit Academy
    ×
  • Subscribe
Enter stock ticker or keyword
×
5 Ways to Beat the Fed (and Crush Inflation)

Email this Article

Send with mail | ahoo instead.
Required Needs to be a valid email
Required Needs to be a valid email
Don't Buy DoorDash Stock Unless the Price Hits This Magic Number
https://moneymorning.com/?p=1173104
Required Please enter the correct value.
Twitter
Stocks: GRUB, LYFT, UBER

Don't Buy DoorDash Stock Unless the Price Hits This Magic Number

By Mike Stenger, Associate Editor, Money Morning • December 9, 2020

Start the conversation

Comment on This Story Click here to cancel reply.

Or to contact Money Morning Customer Service, click here.

Your email address will not be published. Required fields are marked *

Some HTML is OK

The DoorDash IPO is finally here, and investors are lining up to get a piece of the world's biggest third-party food delivery company as soon as they can. But don't buy on the IPO date - there's an even better time to buy DoorDash stock down the road.

We'll show you exactly when that is. All you have to do is look for one number...

IPO prices are widely known to be inflated by hype. And DoorDash is by no means short of it. DoorDash initially expected to price between $75 and $85 per share. More recently, It targeted the $90 to $95 range, hoping to raise $3.1 billion from the shares.

The company ended up selling IPO shares for $102, pricing well above that range.

"Hype" isn't necessarily baseless. DoorDash was most recently valued at $32 billion, double what it was only in June and five times its rival, GrubHub Inc. (NYSE: GRUB). It's an incredibly promising company.

However, don't be so quick to pull out your wallet. A momentary rise is fairly common with IPOs. You could find one that takes off from the IPO date and never looks back. Others will get some post-IPO correction (if not a crash).

But there's reason to expect a cheaper DoorDash over the next year. That's when you'll know to buy.

Yes, DoorDash had a hell of a 2020. COVID-19 boosted food deliveries to unforeseen levels as the company saw over 200% year-over-year increase in orders.

But what will happen when COVID-19 is gone and people start hitting restaurants again? That's only one of a few things putting pressure on the DoorDash stock price.

Here's how 2021 could pan out for gig companies - and when to buy DoorDash.

Can the DoorDash IPO Deliver?

Compared to other gig-economy tech startups, DoorDash is a gem.

We like to mention Uber Technologies Inc. (NASDAQ: UBER) and Lyft Inc. (NASDAQ: LYFT) a lot in this context. Similar to food delivery, the ride-hailing companies are bitter rivals in a novel market that is still in the process of consolidating.

A price war between the companies has sunk the revenue of each. And only one of those stocks made it out alive - Lyft is down more than 40% since its IPO in Spring 2019.

Wall Street insider reveals the five obscure stocks that could dominate 2021 in this free video.

On top of that, gig companies have faced heavy legal scrutiny in states like California and New York. Their employees (DoorDash calls them "dashers") are independent contractors with no benefits or workers' comp.

In 2019, a new law was proposed in California that would require employers to treat independent contractors like regular employees. This, again, would cut into revenue for these companies.

The law did not pass in 2020, but that doesn't mean gig companies are out from under the gun.

DoorDash also got in trouble in 2019 for counting customer tips toward the "guaranteed minimum" payment DoorDash promised its drivers. After some bad press, the company has ceased to do this, but they have openly stated that this could "result in an increase to the fees we charge customers," which could affect their customer retention.

The impact of this is yet to be seen in financial reports. Likewise, issues between startups and their contractors remain a threat, though they've faded into the backdrop for now.

So DoorDash is a successful company thus far, with potential storm clouds brewing in the distance. How do you manage this balancing act?

Here's what you could consider...

When to Buy DoorDash Stock

Many variables will weigh on the DoorDash stock price in the coming months. You are likely to see the stock fall shortly after vaccines are distributed in the coming months.

Additionally, the gig economy remains uncertain if legislators remain hawkish as they have been.

In the nearer term, margins are poised to decrease as the company re-enters competition with dine-in restaurants.

Buy Alert: This company is in the sweet spot of an industry projected to be worth $11 trillion by 2026, and its stock is gearing up for a big jump. Click here to get this pick for free.

The good news for DoorDash is that it is top dog in the gig market. The company bought Caviar in 2019, boosting its reach in various cities.

The niche is also nearly consolidated, so DoorDash's role in the market is more clearly defined over time. Postmates was one of the few small competitors remaining, and that was scooped up by Uber.

Now, DoorDash, Uber, and GrubHub will go head-to-head.

Remember, we saw Lyft suffer big time in direct competition with Uber, while Uber continues to deepen its losses with new acquisitions and marketing expenses.

But judging by previous numbers, DoorDash could still be the favorite here - more the "Uber" than the "Lyft" of food delivery. The company's revenue spiked 204% year-over-year for 2019 (note: before COVID). Orders were up over 200% for that year as well.

Uber, which is more sprawled across different markets, may have a tougher time proving itself.

Still, DoorDash is not profitable yet. And the financial inconsistency we mentioned has been revealed the most by its margins right now.

Between 2018 to 2019, DoorDash's net loss climbed from $227 million to $667 million. The gap closed from $534 million to $159 million in 2020.

Now, here's the kicker. With vaccines underway and uncertainty looming in the gig market, we're expecting that loss margin to widen again in the near future. And that would mean there is a much better time to buy DoorDash stock than after IPO.

CNBC's Dan Cramer will tell you to buy DoorDash as long as it's under $100. But you could likely get it under $90 if you wait a while.

In fact, I'd say wait for it to cross the $85 threshold over the summer months. Though investor interest has raised the IPO price above $100, market factors and summer dining could bite into revenue.

Add in the "hype" factor you see today, and you get your magic number: $85. If DoorDash gets there, that's how you get the most bang for your buck.

You need to always keep in your mind that companies like DoorDash are planting their feet in uncharted waters. Gig stocks have to be looked at a little differently, and any silver lining has to be taken with a grain of salt.

This is a great way to look at IPOs in general, as underwriters are incentivized to build excitement around the stock, often resulting in an inflated perception.

You always want to look for hard numbers before a buying decision.

So, expect a minor slump after the IPO excitement.

That said, DoorDash is still one of the most glowing gig stocks we've seen.

Compared to other tech IPOs this year, the financials look solid. The stock is a great value, trading at up to 15 times the year's sales.

It's also leaps and bounds ahead of competitors. Get it cheap if you can!

The Complete List of Best (and Worst) Stocks for 2021

Wall Street insider Shah Gilani says 2021 could be a gold mine for Americans.

He's showing his subscribers exactly which stocks to buy and which to sell.

But you're getting it all for free - no sign-up or credit card required.

Prices, tickers, and company names will be coming your way fast.

It's all right here.

Follow Money Morning on Facebook and Twitter.

Join the conversation. Click here to jump to comments…

Mike StengerMike Stenger

About the Author

Browse Mike's articles | View Mike's research services

Mike Stenger, Associate Editor for Money Morning at Money Map Press, graduated from the Perdue School of Business at Salisbury University. He has combined his degree in Economics with an interest in emerging technologies by finding where tech and finance overlap. Today, he studies the cybersecurity sector, AI, streaming, and the Cloud.

… Read full bio

Login
guest
guest
0 Comments
Inline Feedbacks
View all comments
LIVE
Visit Money Morning Live


Latest News

January 19, 2023 • By Money Morning Stock Research Team

These Stocks Could Go To $0

January 9, 2023 • By Money Morning Stock Research Team

The Government Is Pouring $391 Billion Into These Stocks - Buy Now

December 27, 2022 • By Money Morning Staff Reports

6 IPOs in 2023 You Can’t Afford to Miss
Trending Stories
ABOUT MONEY MORNING

Money Morning gives you access to a team of market experts with more than 250 years of combined investing experience – for free. Our experts – who have appeared on FOXBusiness, CNBC, NPR, and BloombergTV – deliver daily investing tips and stock picks, provide analysis with actions to take, and answer your biggest market questions. Our goal is to help our millions of e-newsletter subscribers and Moneymorning.com visitors become smarter, more confident investors.

QUICK LINKS
About Us COVID-19 Announcements How Money Morning Works FAQs Contact Us Search Article Archive Forgot Username/Password Archives Profit Academy Research Your Team Videos Text Messaging Terms of Use
FREE NEWSLETTERS
Total Wealth Research Power Profit Trades Profit Takeover This Is VWAP Penny Hawk Trading Today Midday Momentum Pump Up the Close
PREMIUM SERVICES
Money Map Press Home Money Map Report Fast Fortune Club Weekly Cash Clock Night Trader Microcurrency Trader Hyperdrive Portfolio Rocket Wealth Initiative Extreme Profit Hunters Profit Revolution Warlock's World Penny Nation Quantum Data Profits Live Trading Alliance Trade The Close Inside Money Trader Expiration Trader Vega Burst Trader Flashpoint Trader Darknet Hyper Momentum Trader

© 2023 Money Morning All Rights Reserved. Protected by copyright of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including the world wide web), of content from this webpage, in whole or in part, is strictly prohibited without the express written permission of Money Morning.

Address: 1125 N Charles St. | Baltimore, MD, 21201 | USA | Phone: 888.384.8339 | Disclaimer | Sitemap | Privacy Policy | Whitelist Us | Do Not Sell My Info

wpDiscuz