DoorDash Investors Face Headwinds To Profits
If you are wondering why DoorDash (NYSE: DASH) stock is having such a hard time in the market we’re here to tell you it is because of insider selling. Not only is this a low-float stock with only 58% of the shares available to trade but the insiders have been shedding them about as fast as they are being made available. Insiders made 79 transactions over the past 12 months for a total of 32.4861 million shares. That amounts to nearly 10% of the total shares or about $5.655 billion dollars. That’s quite a lot of scratch to take out of the market and equal to about 12.5% of the market cap with shares trading at $133.50. When it comes to who’s selling it is a veritable alphabet soup of execs and directors so no one person is to blame.
The institutional activity, on the other hand, points to higher prices and new all-time highs at some point in the future. While activity has slowed down noticeably over the past two to three quarters the net of activity is bullish and total ownership is very high. In fact, institutional activity over the past 12 months is $54.4 billion to the positive in favor of ownership and has total institutional ownership above 75% of the available shares. That, along with the 15.5% being held by the insiders, makes for one tightly held company.
The Analysts Still Like DoorDash
The analysts rate DoorDash as a weak Buy but there are two things of note in the statistics. The first is that the sentiment has been edging higher over the past year and gone from a firm Hold to a weak Buy and the first activity of 2022 is bullish. Evercore ISI upgraded the stock to Outperform from In-Line and placed a $256 price tag on the stock. That compares favorably to the $226 consensus rating which implies about 70% of upside for the stock and the consensus target has been rising. The high price target of $270 was set by Bank of America in the wake of the last earnings report when they reiterated a Buy rating. That target implies another 20% on top of the consensus target.
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Evercore ISI called the stock a structural winner from the pandemic and pointed out accelerating growth in the non-restaurant delivery categories. In their view, the strength of business should provide upside to the Q4 results when the company reports on February 16th. The analysts are expecting to see $1.28 billion which would make a 30% YOY increase but is flat sequentially which we think is underestimating gains made during the pandemic, the spread of Omicron, or the stickiness of digital and eCommerce trends.
The Shorts Aren’t Helping DoorDash
There is a relatively high 5% short-interest in DoorDash which is helping to pressure share prices. Even so, the impact of short selling is due more to the high-profile nature of Jim Chanos’s disclosure of his position than anything else. In his view, the company’s valuation got way out of control and he may be right. Trading well over 400X earnings the company will have to grow its revenue and earnings by triple digits to get the ratios back in line.
The Technical Outlook: DoorDash Hits Bottom
The good news is that DoorDash has hit bottom. The bad news is that insider selling and short interest may keep shares down in the near to mid-term until the company can prove it can make consistent money. Until then, we expect to see DASH bob along at these levels and even drift higher until the next earnings report. At that time, the results and outlook could alter the course of trading.
Experience
Thomas Hughes has been a contributing writer for InsiderTrades.com since 2019.
Areas of Expertise
Technical analysis, the S&P 500; retail, consumer, consumer staples, dividends, high-yield, small caps, technology, economic data, oil, cryptocurrencies
Education
Associate of Arts in Culinary Technology
Past Experience
Market watcher, trader and investor for numerous websites. Founded Passive Market Intelligence LLC to provide market research insights.
