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Why Airbnb being valued at $101 billion and DoorDash at $66 billion may end badly, quickly

Brian Sozzi
·Editor-at-Large
·4 min read
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Airbnb (ABNB) and DoorDash (DASH) will have to come out of the gate blasting financially as public companies, given the borderline insane valuations giddy investors afforded both on their respective IPO days.

In other words, with such heady valuations from the jump for the non battle-tested home rental and food delivery businesses — the Street will be expecting the sky and the moon from co-founders and CEOs Brian Chesky (Airbnb) and Tony Xu (DoorDash) on each earnings day for, well, perhaps the next five years.

Good luck living up to those expectations every three months.

“These companies [Airbnb and Doordash] will have to produce results that in fact meet or beat investor expectations,” Renaissance Capital principal Kathleen Smith told Yahoo Finance Live. “The bar is being set very high by just looking at the day one performance.”

You aren’t kidding about the wild one-day performances.

Airbnb finally opened for trading Thursday at $146 a share, dusting the initial public offering price of $68. The opening trade on Airbnb valued the company at $101.6 billion.

Brian Chesky, CEO of Airbnb, is shown on an electronic screen,, center, at the Nasdaq MarketSite, Thursday, Dec. 10, 2020, in New York. The San Francisco-based online vacation rental company holds its IPO Thursday. (AP Photo/Mark Lennihan)
Brian Chesky, CEO of Airbnb, is shown on an electronic screen,, center, at the Nasdaq MarketSite, Thursday, Dec. 10, 2020, in New York. The San Francisco-based online vacation rental company holds its IPO Thursday. (AP Photo/Mark Lennihan)

For some perspective on the real-life market mania, that’s more than the combined market caps for Airbnb’s established rivals Marriott, Hilton and Hyatt of $80 billion. That’s more than the $62 billion market for 112-year-old auto giant General Motors (which is sitting on some game-changing electric vehicle technology, as GM CEO Mary Barra recently told Yahoo Finance Live).

The market reception to DoorDash’s IPO on Wednesday was nothing to sneeze at either.

Shares of the food delivery service rose about 80% on its first day of trading on the New York Stock Exchange. While DoorDash shares gave back 8% Thursday, the company still sports a market cap north of $66 billion. That’s more than Burger King and Popeye’s owner Restaurant Brands’ $18.6 billion market value.

“There is a lot of enthusiasm about companies that are familiar to the mass consumer. DoorDash and Airbnb are very familiar names, and they tend to get a hotter reception when they come out,” Smith said of the fiery market debuts. “But the bottom line is these companies have to trade connected with the performance and the financial results. And so that we are going to see in the next couple of months if we can look back and say gee, they left so much money on the table or not. We’ll see.”

Why this could all end badly for investors in both companies — at least those chasing IPO-day momentum in the near-term — boils down to what Smith said about on sky-high expectations and financial reality.

Airbnb has posted $2.1 billion in cumulative losses since its creation in 2008. It reported $697 million in losses through the first nine months ended Sept. 30. Not only has Airbnb managed to never turn a profit during the pre-pandemic good travel times, when it may turn a profit post pandemic is anyone’s guess.

But the Street will want to see a clear path to profits for Airbnb on its first earnings day (not unlike what Uber has had to endure from Wall Street since its 2019 IPO) due to its insane market debut. No quick path to profits from Chesky and his executive team to profit thirsty Wall Street, and the stock could easily be put in the penalty box.

The same goes for Xu over at DoorDash, who oversees a business that has lost $149 million through the first nine months of 2020. That’s even as a large part of the country is ordering food from home during the COVID-19 pandemic.

We wish both of these executives well on that first earnings call. The bar will be high.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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