When it comes to red-hot tech stocks, investors like to get in early. Plenty of investors have bought shares of booming tech companies during their first days of trading and have laughed all the way to the bank.
However, buying a stock right after its initial public offering (IPO) can involve a substantial amount of risk. And even though the stock market seems to have an unlimited appetite for tech plays these days, not all tech IPOs go up forever.
DoorDash Inc (NYSE:DASH) stock, for instance, skyrocketed during its first day of trading, but went on to fall quite a bit in subsequent trading sessions.
You see, DoorDash priced its IPO at $102.00 per share on December 8, 2020. When the stock began trading on December 9, it opened at a shocking $182.00, reached a high of $195.50, and closed at $189.51. In other words, on its first day of trading, DoorDash stock enjoyed a gain of 85.8%.
And it was very obvious why there was so much investor enthusiasm for this stock. DoorDash Inc’s platform allows customers to order food from nearby restaurants and have the food dropped off at their door by a courier within a short period.
With dining rooms closed at many restaurants due to the COVID-19 pandemic, DoorDash’s food delivery service has been firing on all cylinders.
According to DoorDash’s recent filing to the U.S. Securities and Exchange Commission (SEC), more than 390,000 merchants were using the company’s platform, including 175 of the 200 largest restaurant brands in the U.S. (Source: “Filed Pursuant to Rule 424(b)(4),” DoorDash Inc, December 8, 2020.)
The company’s growth story has been very, very impressive. In 2013, DoorDash launched its platform, and in October 2019, it completed one million deliveries per day for the first time. Today, DoorDash has more than 18 million customers.
To serve those customers, more than one million independent couriers, who the company calls “Dashers,” deliver orders through the company’s local logistics platform.
The company estimates that it has a 50% share of the food delivery market in the U.S., well ahead of its rivals like Uber Eats—which is part of Uber Technologies Inc (NYSE: UBER)—and Grubhub Inc (NYSE:GRUB).
DoorDash’s platform covers all 50 U.S. states and Puerto Rico, plus Canada and Australia.
DoorDash Inc (NYSE:DASH) Stock Chart
As I said earlier, after DoorDash stock skyrocketed on its first day of trading, its momentum seemed to slow down. Over the next three weeks, DASH stock traveled on a downtrend.
The neat thing is, after forming what seemed to be a bottom around $140.00 in late December to early January, DoorDash stock started climbing back up.
Chart courtesy of StockCharts.com
As the above chart shows, from January 7 to January 12, DASH stock shot up 37.1% and is now back to where it was during its first day of trading.
By looking at the chart, we can see that DoorDash stock is a very volatile ticker. From a fundamental perspective, though, the company has a solid business.
DoorDash Inc’s Financials
To investors, the most exciting part about DoorDash could be the growth in its financials.
In 2019, the company earned $885.0 million of revenue. Then, in the first nine months of 2020, DoorDash generated $1.9 billion of revenue. (Source: DoorDash Inc, December 8, 2020, op. cit.)
So in just three quarters of 2020, the company had already doubled its revenue from the previous year.
At the bottom line, DoorDash incurred a net loss of $149.0 million in the first nine months of 2020. While that means the company is yet to turn a profit, the amount was substantially better than the $534.0-million net loss it reported for the first nine months of 2019.
Because part of the growth in DoorDash Inc’s business has been due to the COVID-19 environment, the company will face uncertainty as the pandemic wears off.
But with an established market position in the food delivery business, DASH stock could be an opportunity for growth investors.