about 3 years ago • 3 mins
DoorDash will start next year feeling reinvigorated: the food delivery service hit the stock market on Wednesday, and investors initially sent its shares up 80% 🥘
What does this mean?
Just like Deliveroo, Just Eat Takeaway.com, and Uber Eats, DoorDash delivers meals straight to the homes of hungry diners. And with 50% of the US food delivery market to its name, the company’s done well from a pandemic that’s had people ordering more than they might’ve if restaurants were open. In the first nine months of 2020, in fact, DoorDash processed food orders worth $16.5 billion – three times more than the same time last year. That means it’s earned a lot more in commission, as well as laid the groundwork for a successful initial public offering (IPO).
And that’s exactly what it got: DoorDash raised $3.4 billion from its IPO after having hiked its starting share price twice in the last week 📈 That put the entire company’s valuation at $38 billion – making it one of the US’s biggest IPOs this year.
Why should I care?
The bigger picture: ‘Tis the season.
December is typically a quiet month for stock markets, but this year is anything but typical 🙄 DoorDash will be followed onto the stock market on Thursday by Airbnb – whose shares are looking increasingly expensive – and next week by ecommerce platform Wish. And before the year’s out, they’ll be joined by fintech Affirm and children’s game company Roblox too.
For you personally: Room for a small one?
The privilege of buying into a company before it’s public is almost exclusively reserved for venture capital and private equity firms ⛔️ But there are a couple of ways you can get ahead of the game too: you could “angel invest” in the next big thing through personal connections or crowdfunding platforms, or find a broker that offers “grey markets”, which let you speculate on a company’s share price before it lists.
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Campbell served up stronger-than-expected quarterly earnings on Wednesday, but the soup-maker left a suspicious aftertaste in investors’ mouths 🥫
What does this mean?
Ordinarily, investors might’ve been happy with an update like this one. Campbell’s profit, after all, beat investors’ forecasts last quarter, thanks in part to lower-than-expected marketing expenses. Its revenue did too: sales came in ahead of expectations partly because Campbell reduced its promotional offers, forcing customers to pay more.
On this occasion, though, analysts were worried that the “quality” of the update suggested weak earnings could be on the way. For one, Campbell had previously promised to increase, not cut back, its marketing spend relative to its sales 📊 And for another, its decision not to invest in promotions was a dubious one, considering a resurgent coronavirus was making shoppers prioritize cost-effectiveness once again. And that could mean it’ll struggle both to hold on to old customers and win over new ones…
Why should I care?
For markets: Look on the bright side.
Campbell’s shares fell 2% on Wednesday, even as US stocks overall rose to a record high. But that drop might’ve been worse if Campbell hadn’t announced a higher-than-expected dividend 💵 Spare a thought, then, for wholesale grocery distributor United Natural Foods, whose shares fell 11% on Wednesday after it revealed lower-than-expected quarterly earnings – with no dividend-colored lining to speak of.
The bigger picture: Flavor of the month.
Investors are increasingly eyeing up smaller companies’ shares, as well as those of “cyclicals” like autos and construction that tend to do well in an economic recovery 👀 And as we move into said recovery and away from recession, it’ll likely be consumer staples like Campbell – which are generally expected to thrive when the going’s rough – that are scrubbed off the “flavor of the month” chalkboard.
Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.