Is the DoorDash IPO Overvalued?

DoorDash Inc. (NYSE: DASH) entered the market with a bang on Wednesday in its initial public offering. The company priced its 33.0 million shares at $102, above the expected price range of $90 to $95. However, shares actually entered the market around $181, blowing out all expectations.

The underwriters for the offering were Goldman Sachs, JPMorgan, Barclays, Deutsche Bank, RBC Capital Markets, UBS Investment Bank, Mizuho, JMP Securities, Needham, Oppenheimer, Piper Sandler and William Blair.

DoorDash has been one of the most popular companies during this pandemic, as everyone wants food delivered. This company filed to come public back in February, but with the pandemic just taking off then, the company decided to push back the IPO.

DoorDash works with local brick-and-mortar businesses to drive sales in an increasingly convenience-driven economy with rapidly evolving consumer expectations. The company does this primarily through the DoorDash Marketplace, which offers a broad array of services that enable merchants to solve mission-critical challenges such as customer acquisition, delivery, insights and analytics, merchandising, payment processing and customer support. DoorDash helps merchants drive significant incremental sales and leverage the fixed cost investments that they already have made.

In 2019, and during the nine months ended September 30, 2020, the company generated revenue of $885 million and $1.9 billion, respectively. In the same periods, it had gross profit of $335 million and $944 million, respectively, and −$200 million and $433 million, respectively, in contribution profit. In the same periods, the company had a net loss of $667 million and of $149 million, respectively, as well as −$475 million and $95 million, respectively, in adjusted earnings before interest, taxes, depreciation and amortization.

The company intends to use the net proceeds from the offering for working capital and general corporate purposes. Also, the company may use a portion to fund a $200 million pledge as part of its Main Street Strong program to support merchants, Dashers and local communities.

DoorDash stock traded up 83% to $187.12 on Wednesday, in a range of $163.81 to $190.00 on the day thus far. About 7 million shares had moved as of 12:45 p.m. Eastern.