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DoorDash went public on the NYSE on December 9.
Credit to NYSE
By Dash
Shares came under some selling pressure on Thursday after short-selling firm Citron Research released an aggressively negative report on the food delivery company, set a price target of $ 40 and reiterated another analyst’s claim that this is “the most ridiculous IPO of 2020.”
The Citron report states that DoorDash (ticker: DASH) is in a highly commoditized business with little competitive advantage, and fundamentals cannot justify the company’s valuation of nearly $ 50 billion.
“In a year with many interesting IPOs from a disruptive data platform
Snowflake
to a leading big data software player
Palantir
to mobile game engine
Unit,
there is one IPO that stands out from the crowd because not all IPOs are the same… DoorDash, ”Citron writes in the report. “No business is more commoditized and competitive than food delivered to your door from the restaurant. There is no distinction between Uber Eats, Postmates, Caviar,
Grubhub,
DoorDash, or a local provider. Worse still, this business model has no brand loyalty as the consumer simply chooses who will deliver their food at the cheapest price. ”
DoorDash declined to comment on the Citron report.
Note that Uber Eats recently acquired Postmates and DoorDash itself bought Caviar in 2019, so the competitive set isn’t as big as the report suggests, and the report is marred by a few other inaccuracies.
Citron claims DoorDash trades 19 times for sale, which is an exaggeration; the company is likely to have sales of about $ 4 billion this year, which would put the multiple at more than 12 times, although that is certainly much more than the quadruple
Just eat Takeaway.com
pays for Grubhub (GRUB).
Citron also notes that DoorDash had 33% of the US market in 2019, but doesn’t credit the company with recent reports that put its current market share at 50%.
Meanwhile, Citron uses the same headline in its research paper – “The Most Ridiculous IPO of 2020” – as a report published Dec. 2 by boutique research firm New Constructs. That report also includes the words ‘The Most Ridiculous IPO of 2020’ in large print, making this one of the more ridiculous examples of headline plagiarism of 2020. (In fact, New Constructs had an earlier version of its bearish DoorDash report with the same headline on Nov. 23.)
The bigger point about Citron is that day traders have “recklessly” bid DoorDash stock without taking due diligence. “With countless IPOs and SPACs hitting the market giving investors the chance to bet on space, electric vehicles and other disruptive technologies, we don’t see how a food delivery [company] can maintain a valuation of more than $ 50 billion, “he writes.
DoorDash shares fell 2.4% to $ 154.25 Thursday. The S&P 500 rose 0.6%.
Write to Eric J. Savitz at [email protected]