AIRBNB vs DOORDASH

Without a doubt, this year doesn’t stop giving surprises, and this week we saw how two of the most anticipated companies by investors (both individual and institutional) began to trade on Wall Street through their initial public offering.

First, let's remember that an initial public offering (IPO) is the moment when a company decides to start trading on the stock market, and therefore, decides to put its shares into circulation, resulting in the participation of thousands of investors who have been waiting for this moment for a long time, because they are two of the most popular "unicorns" in the world of "high tech companies".

Of course, both AIRBNB and DOORDASH were extremely powerful companies in their fields before their IPOs were carried out. However, like many companies around the world, they had seen their market share begin to decline due to the arrival of the coronavirus and the extensive government restrictions that began to be established in most countries.

Between the two, AIRBNB was undoubtedly the most affected, because its business model depends on tourism and accommodation, two of the items hardest hit by the pandemic. Even in April, this business giant saw its income fall by up to 80%, something that its own CEO (Brian Chesky) classified at the time as "a catastrophic moment for the company."

Doordash, for its part, was able to keep its income stable, because its business model is mainly sustained by the delivery of food and various products, actions that multiplied massively during quarantine times, due to the impediments that people had to be able to physically go to a supermarket.

This week, AIRBNB held its long-awaited IPO, an event that investors of all stripes around the world eagerly awaited. Its shares opened at a price of 146 dollars per share, which at the end of the day, ended up adding about 54 billion dollars to the total market value of the company, something that put AIRBNB with a market cap of more than 100 billion dollars, something that positively surprised its business team, because talking about figures like that was something unexpected at the beginning of the year.

Of course, most of these investors are the so-called “retail investors”, who in most cases make their investment decisions solely based on the company's products or their popularity.

Most experienced investors agree that the opening price is undoubtedly high, and that it would not be entirely common for it to settle lower in the coming weeks. This occurs because many of the individual investors who participate in IPOs, are carried away by speculation, rather than in financial reports of the company.

Doordash, the other business giant that had its IPO this week, had an opening price of $ 102 per share, projecting the market cap of the company around 60 billion dollars, something that was also considered "overpaid" by many economists and finance experts around the world.

Undoubtedly, both companies represent a large share in terms of market share in their respective industries, but are they reliable companies for long-term investors? Historically, IPOs do not represent the future in terms of the monetary value of a share, since we have seen on many occasions how a company that began offering its shares for a few cents, has managed to escalate its price to quite high figures, just as we also have seen others that have had a pretty good first few days in the stock market, and then (as investor excitement and euphoria goes down) their price begins to plummet.

In my opinion, these are two companies that individual investors should start to study and add to their “stock watchlist”, but beware, because investing in a stock without previously conducting a financial analysis and determining the fair value of a stock could be detrimental to your portfolio in the long term.