DoorDash's Valuation Already Raising Some Eyebrows

One of the most highly anticipated IPOs of 2020 hit the ground running Wednesday, but DoorDash's eye-popping valuation out of the gate is already raising some eyebrows.

What Happened? Food delivery service DoorDash Inc DASH priced its IPO shares at $102 on Tuesday night, above the high end of its target range of between $90 and $95.

When shares began trading on Wednesday, they opened at $180 — roughly an 80% gain.

The staggering early gains translate to a market cap of roughly $60 billion for DoorDash, which has some market experts feeling a bit uncomfortable.

Related Link: JPMorgan Says Tesla's Valuation Is 'Difficult To Conceive In Any Imagined Scenario'

Why It’s Important: For starters, DoorDash reported just $1.9 billion in revenue and a net loss of $149 million in the first nine months of 2020.

After acquiring Postmates earlier this year, Uber Technologies Inc UBER now holds about a 35% share of the U.S. food delivery versus about 45% share for DoorDash.

Uber’s full market cap is just $95.3 billion, despite Uber Eats representing only a small portion of Uber’s total pre-pandemic business.

DoorDash now has roughly twice the sales as food delivery pure-play competitor GrubHub Inc GRUB. Twice the sales currently translates to roughly 11 times the valuation.

Auto giant Ford Motor Company F has only a $36.8-billion market cap, about 60% of the size of DoorDash. Last quarter, Ford reported $37.5 billion in revenue compared to just $879 million for DoorDash.

Domino's Pizza, Inc. DPZ is certainly no stranger to food delivery, and it beat out DoorDash with $967 million in revenue last quarter.

Yet DoorDash’s valuation is about four times Domino’s $15.2-billion market cap.

While these types of comparisons are an easy way to poke fun at what many see as overexcitement for a high-profile tech IPO, Benzinga’s PreMarket Prep co-host Dennis Dick hinted at a potentially more troubling comparison on Wednesday.

“$60B for a food delivery service. Welcome to 1999. $DASH,” Dick tweeted.

Benzinga’s Take: Of course, Dick was referring to the dot-com bubble of 1999 and 2000, when companies with unproven business models were routinely going public at valuations that their underlying businesses would never, ever come close to justifying. The dot-com bubble comparisons may swirl even harder on Thursday given that Airbnb is expected to go public at a projected valuation above $42 billion.

Photo courtesy of DoorDash.