That's super high growth and a huge improvement in margins, two things which almost never happen simultaneously.”ĭoorDash CEO Tony Xu, when asked by The Information on Wednesday about his company’s eye-popping stock price at the end of its first day of trading, said, “Everyone is entitled to their opinion.” Competition and consolidation in food-delivery space

“So they're going to go from a negative 12% to a positive 8% margin, while also growing revenue at 40% compounded annually for over a decade. “What $200 per share implies the company will do in the future is improve their margins to 8%, compared to negative 12% now,” Trainer says. “Is it a coincidence,” Trainer wrote in a note last week, “that DoorDash filed for its IPO so soon after COVID-19 vaccines were announced? 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.” He also predicts the end of the pandemic will mean the end of big growth in orders for all the food delivery apps. Short-lived pandemic boost?īut Trainer says revenue growth doesn’t mean much for a company that hasn’t proven it can turn revenue into profit. the same period in 2019, thanks to a boost in demand during the pandemic. This is Silicon Valley selling public markets an asset at a huge premium, and they're going to laugh all the way to the bank, and I think a lot of individual investors rushing into this are going to lose a lot of money.”ĭoorDash touted in its S-1 IPO filing that its revenue surged 226% in the first nine months of 2020 to $1.92 billion vs. At the end of the day, this business is a race to a zero-margin business, because there's really no differentiation. And we're seeing their market share decline. “They do not have a way to make money long-term,” Trainer said on Yahoo Finance Live just after DoorDash began trading on Wednesday. Why ridiculous? Lack of profitability huge competition and a potential example of pandemic pull-forward in demand. That means a market cap of $72 billion for a seven-year-old startup that lost $667 million in 2019, and lost $149 million in the first nine months of 2020.ĭavid Trainer, CEO of market research firm New Constructs, calls it “the most ridiculous IPO of 2020.” Last year, his firm gave that title to the WeWork IPO, which was ultimately shelved. Food delivery app DoorDash ( DASH) hit the public market on Wednesday, and closed the day up 86% from its IPO price of $102.

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