Famed tech investor and portfolio manager at Independent Solutions Wealth Management, Paul Meeks, gave his bearish views on DoorDash Inc DASH and AirBnB Inc ABNB on CNBC.
What Happened: Meeks said DoorDash is overvalued at its current valuation. "I would short DoorDash here. It's just crazy overvalued," he said.
There is nothing special in DoorDash's business model, as per Meeks. The delivery aggregator is losing money even as restaurants are paying commissions as high as 20%. As the restaurants move to pay reasonable commissions to delivery aggregators, DoorDash would lose more money.
"Right now, it's trading for 20x sales, and good software companies trade at only 6x sales," Meeks said.
Meeks has also sold his position in Airbnb. He was involved in the company's IPO and thinks that Airbnb has a good business model. Yet, Meeks said that he could not justify the company's current valuation as it has run more than 140% since its IPO.
Why It Matters: Meeks is not the only fund manager to sound an alarm on DoorDash and AirBnB's valuation post IPO. Last week, Goldman Sachs Group Inc GS Chairman and CEO David Solomon warned against the IPO frenzy.
Famed short-seller Citron Research also gave a bearish view on DoorDash and called it the "most ridiculous IPO of 2020." Citron put a $40 price target for DoorDash.
However, Meeks isn't bearish when it comes to the broader tech sector, which, he expects, will outperform in 2021.
Meeks said that there would be some rotation into the value and cyclical stocks at the beginning of 2021 as the economy reopens but tech stocks will be leading by the end of the year.
Price Action: DASH shares closed 2.15% lower at $156.79 on Tuesday, while ABNB closed 0.10% higher at $163.19.
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