Short Seller Citron Issues Bearish DoorDash Report, Sets $40 Stock Target

DoorDash went public on Dec. 9 at the NYSE.

Courtesy of NYSE

DoorDash shares came under some selling pressure Thursday after the short-selling firm Citron Research issued an aggressively negative report on the food-delivery company, setting a price target of $40 and repeating another analyst’s claim that this is “the most ridiculous IPO of 2020.”

The Citron report argues that DoorDash (ticker: DASH) is in a highly commoditized business with little competitive advantage, and that fundamentals that can’t justify the company’s nearly $50 billion valuation.

“In a year of many interesting IPO’s, from disruptive data platform Snowflake to leading big data software player Palantir to mobile game engine Unity, there is one IPO that stands out from the rest as not all IPO’s are the same…DoorDash,” Citron writes in the report. “There is no business that is more commoditized and competitive than having food delivered from the restaurant to your home. There is zero differentiation between Uber Eats, Postmates, Caviar, Grubhub, DoorDash, or any local provider. Even worse, this business model has no brand loyalty as the consumer just picks who will deliver their food for the cheapest price.”

DoorDash declined to comment on the Citron report.

Note that Uber Eats recently acquired Postmates, and DoorDash itself bought Caviar in 2019, so the competitive set isn’t quite as large as the report implies, and the report is marred by a few other inaccuracies.

Citron asserts that DoorDash trades for 19 times sales, which is an exaggeration; the company is likely to post revenue this year of about $4 billion, which would put the multiple at more like 12 times, although that certainly is far more than the four times forward sales multiple that Just Eat Takeaway.com is paying for Grubhub (GRUB).

Also, Citron notes that DoorDash had 33% of the U.S. market in 2019, but doesn’t credit the company for recent reports that put its current market share at 50%.

Meanwhile, Citron uses the very same headline on its research note—“The Most Ridiculous IPO of 2020”—as a report published Dec. 2 by the boutique research firm New Constructs. That report also has in large type the words “The Most Ridiculous IPO of 2020,” which makes this one of the more ridiculous examples of headline plagiarism of 2020. (In fact, New Constructs on Nov. 23 had posted a previous version of its bearish DoorDash report with the very same headline.)

Citron’s larger point is that day traders have “recklessly” bid up DoorDash shares without doing due diligence. “With numerous IPO’s and SPAC’s hitting the market and giving investors the opportunity to bet on space, electric vehicles, and other disruptive technologies, we don’t see how a food delivery [company] can maintain a valuation of over $50 billion,” he writes “See you at $40.”

DoorDash stock fell 2.4%, to $154.25, on Thursday. The S&P 500 was up 0.6%.

Write to Eric J. Savitz at eric.savitz@barrons.com