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Commentary

DoorDash IPO Stuns

The U.S. food delivery service made quite a market debut.

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Wednesday belonged to DoorDash (DASH).

The U.S. food delivery service’s stock skyrocketed in its market debut, closing at $189.51 – well ahead of the $102 initial public offering (IPO) price the company had set on Tuesday night.

Clearly, investors continue to pay top dollar for leading tech IPOs – even for companies like DoorDash that aren’t yet profitable.

“In our view, DoorDash’s successful IPO validates venture backing of early-stage mobility startups,” says Asad Hussain, lead mobility analyst at PitchBook, a Morningstar company. “We expect VC funding toward mobility to increase as investors deploy capital towards sectors with pandemic-induced tailwinds. Novel technologies such as delivery platforms, autonomous/electric vehicles, and micromobility have made it clear that startups will play a key role in shepherding in the future of transportation.”

Hussain also notes that there’s plenty to like about DoorDash.

“DoorDash is growing at a blistering pace of 200%-plus, well ahead of its competitors thanks to its focus on higher-ticket, fast-growing suburban markets, and knocking on the door of sustained profitability with a 10% adjusted EBITDA margin delivered in the third quarter,” he explains. “We believe there is a long runway of growth ahead for DoorDash and expect consumers to continue to favor food delivery even beyond the pandemic.”

However, given the stock’s remarkable one-day run-up, this story might be best watched from the sidelines for now.

Susan Dziubinski does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.