Is Overall Sentiment on DoorDash Bearish?

By Tamara Parker • Friday, October 21 11:25 • Permanent Link

Tumbling to a price of $44.25 during today's morning trading session, shares of DoorDash are now -58.18% below their average target price of $105.82. Does this mean the stock will reverse course? Analysts are giving DASH an average rating of buy and target prices ranging from $55 to $185 dollars per share.

For the greater market's outlook on the stock, we can use DoorDash's short interest as a proxy. The short interest represents the proportion of the float's shares that are tied to short positions, meaning that the investor believes the stock will decline in the future. Here, the stock's short interest is 7.4% which means the outlook is split.

Short selling involves borrowing shares and then selling them at current market prices. In the successful version of the strategy, the shares are purchased at a lower price at some time in the future. The investor then returns the shares to the lender, and keeps the profit made on the sell/buy transaction.

Another way to gauge the sentiment on DoorDash is to look at the percentage of institutions that are invested in the stock. In this case, 87.8% of the shares are held by pension, mutual, and hedge funds, which shows that these institutions probably have strong confidence in the stock.

Institutions have vast resources. If institutions are invested in a particular stock, it shows in most cases that they have performed quality research and concluded that it is a good investment. In some cases, however, increases in institutional ownership could be a sign of a takeover attempt or proxy fight, which can actually injure share prices. Also, institutions are not infallible, and can certainly make miscalculations -- often with spectacular results.

To sum up, DoorDash is probably the subject of exuberant market sentiment because of its an analyst consensus of strong upside potential, a buy rating, an average amount of shares sold short, and a significant number of institutional investors. At Market Inference, we believe that any investment decision should be preceded by an in-depth analysis of the company's fundamental values and a comparison with similar stocks.

Here's a snapshot of some important facts to keep in mind about DASH:

The stock has trailing 12 month price to earnings (Eps) of $-1.53 per share
DoorDash has a trailing 12 month Price to Earnings (P/E) ratio of -28.8 compared to the S&P 500 average of 15.97
The company has a Price to Book (P/B) ratio of 2.3 in contrast to the S&P 500's average ratio of 2.95
DoorDash is a Communication Services company, and the sector average P/E and P/B ratios are 18.65 and 2.62 respectively

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The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.