One day doesn’t make a trend. But two weeks as a public company and bears are offered an opportunity on their doorstep With the Dash (NYSE:LINE). Let’s take a look at what’s going on off and on the DASH stock price chart, and then offer a risk-adjusted position that is in tune with those results.
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DoorDash’s recent IPO and grocery delivery service has had a tough time since it debuted on the NYSE on Dec. 9. An intraday high of $ 195.50 and almost double its spike in IPO of $ 102 quickly became an all-time high. Additionally, that brief buzz shows no indication that DoorDash stocks are 20% off their highs.
So what went wrong compared to high profile IPOs? Airbnb (NASDAQ:ABNB) and C3.AI (NYSE:AI) which debuted within a day of DoorDash and both stocks hit new highs on Tuesday? Quite simply and in various ways, many emphasize that DASH stocks are too expensive.
From “Why I’ll Never Own DoorDash Stocks” to “Avoid DoorDash Stocks Unless You Can Handle the Pressure” headlines, the well-tracked short seller Citron Research calls DASH “the most ridiculous IPO of 2020” or Mr. Bull Market himself Jim Cramer says you only get his blessings at $ 100 or less, the Wall Street community agrees. There’s a lot about DoorDash these days that you don’t like unless you’re a bear.
To be sure, Wall Street investment banks deserve a nod. You ran a road show that resulted in a remarkably successful $ 68 billion initial public offering. But unless you are a DoorDash insider or investor assigned part of this promotion, I would heed the warnings like the one from above. In addition, and with DASH stock providing a price chart that was crafted for further downside movement, bears may want to sink their teeth into a trade.
DASH Stock Daily Price Chart
Source: TradingView charts
Could DoorDash be worth $ 40? Citron Research believes this is possible. At least I like what I see near $ 156 per share, with a view to a lower share price in 2021.
Outside of the chart, there is DoorDash’s wildly high sales multiplier when compared to competitors in grocery delivery Over (NYSE:ABOVE) and Grubhub (NYSE:RODEN). It’s about. Yahoo Finance shows DASH stocks get 19.5 times sales, up from 7 to 8 times for GRUB and UBER. It’s also a flag that is reinforced by a lack of stickiness on the part of consumers. The bottom line is that most of us don’t care what service our food delivers, as long as it’s quick and cheap.
Citron also points out the possibility of government regulation. Should this happen and thereby depress margins, an oversight would reasonably put more of a burden on DoorDash in view of its valuation. A share price of $ 156 appears to be even more at risk.
The price chart in DoorDash seems acceptable for lower prices too. Technically, two weeks isn’t much when it comes to price promotions. Aside from the noted weakness against AI and ABNB stocks, DASH stock confirms a bearish entry that was just signaled today.
The bottom line
Tuesday’s modest drop in prices was traded by Monday’s bear flag candle which found resistance between DoorDash’s resistance levels of 50% to 62%. Given the situation, and for investors willing to be short, the bear put spread of $ 140 / $ 125 looks on the price chart in February for a small snack that could turn into a sizable meal.
At the time of publication, Chris Tyler has no direct or indirect positions in the securities referred to in this article.
Chris Tyler is a former ground-based derivatives market maker on the US and Pacific exchanges. The information offered is based on his professional experience, but is intended for educational purposes only. The use of this information is 100% the responsibility of the individual. For more market insights and related considerations, follow Chris on Twitter @Options_CAT and StockTwits.