A slew of brokerages initiated coverage of Airbnb Inc and DoorDash Inc on Monday, having high hopes for their revenue growth and supporting eye-popping valuations obtained by both last month in stock market launches.
Home rental firm Airbnb was valued at just over $100 billion at the time of its market debut in the biggest U.S. initial public offering (IPO) of 2020, while food delivery company DoorDash was valued at more than four times its worth at an earlier fundraising round.
The IPOs underscored investor appetite for technology firms, with both being app-based, and analysts are predicting steady growth as travel restrictions ease and the global food delivery business continues to expand.
More than 25 brokerages initiated coverage on the two companies. Banks that worked on both firms’ IPOs had been required by industry practice to refrain from initiating coverage until Monday.
Morgan Stanley, Goldman Sachs, BofA and others led a 37-firm underwriting group for Airbnb’s IPO, while Goldman Sachs and JP Morgan led a syndicate of 12 firms on DoorDash’s offering.
Credit Suisse expects pandemic-driven changes in behavior to speed up the shift away from hotels to alternative accommodations and the analysts see ample opportunity for Airbnb to increase monetization in the long term.
Jefferies analysts expect a return to 2019 bookings and revenue levels by the second half of 2021 and double-digit growth through 2025, with annual profits expected by 2022.
Airbnb’s revenue fell 18% in the third quarter of 2020, but it turned a profit, helped mainly by cost cuts.
Piper Sandler analysts were similarly bullish on DoorDash.
“We think DoorDash has a shot at achieving “super app” status in the doorstep delivery market, with a better business model (in our view) than Neutral-rated Uber” Piper Sandler analysts said.
TEMPERED EXPECTATIONS
Analysts at BofA, however, expressed concern over Airbnb’s valuation.
“We see Airbnb’s valuation (versus) peers as the biggest stock concern given that Airbnb services are not new ... and competitors Booking and VRBO have solid positions in their “home” markets,” the analysts said.
BofA also said DoorDash’s premium multiples are warranted given its greater scale and share gains, but warned of slowing growth pressuring valuation in 2021.
Brokerages not involved in the IPOs had earlier downgraded the stocks, based on their valuations, with Citron Research saying that DoorDash’s IPO “was the most ridiculous IPO of 2020”.
Shares of Airbnb were down 3.1% on the Nasdaq, while DoorDash’s stock was down 2.45% on the New York Stock Exchange.
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