Jim Cramer sees “mad cash” for tech IPOs, says do not chase DoorDash
CNBC’s Jim Cramer said Wednesday he believes there is “rabid money” interested in upcoming technology IPOs, but urged younger investors not to chase DoorDash once the third-party public goes public.
“When people know the brand, the younger investors just say, ‘You know what, get me something,'” Cramer said in Squawk on the Street. “DoorDash is used by a lot of younger people, both in the suburbs and in.” I think you will experience incredible excitement. “
DoorDash, which began trading Wednesday, sold shares as part of its IPO at $ 102 each, above the target of $ 90 to $ 95. The stock opened at $ 182 per share later on Wednesday, bringing DoorDash to a market cap of $ 57.8 billion.
Before opening, Cramer urged young investors to be careful with the hunt for the stock. The “Mad Money” host previously advised investors to buy it for just under $ 100 per share.
“I don’t want them to lose their discipline because then we start a period of 1998, 1999,” Cramer said, citing speculation in technology stocks that fueled the dot-com bubble.
DoorDash marks the first IPO in a wave of consumer tech in the late year, which includes the expected debut of the online rental market Airbnb on Thursday. The online stock trading app Robinhood, which is also preferred by younger investors, is said to have hired Goldman Sachs to lead a possible IPO next year.
There’s just a general appetite for public offerings from technology companies, Cramer said. “There’s a lot of money, rabid money. I think there is money that basically says, ‘We don’t really care what the opening price is going to be,'” he added. “There won’t be a lot of discipline with a lot of these market buyers. They won’t set a price limit.”
DoorDash, in particular, has seen tremendous growth during the coronavirus pandemic. Orders that stay at home are driving more consumers to choose to have groceries delivered to their doorstep. The company’s order volume for the first nine months of this year was $ 16.5 billion, compared with $ 5.5 billion in the same window in 2019.
Many on Wall Street are wondering what will happen to DoorDash’s business after the worst of the pandemic has subsided.
While recognizing that people would rather dine in restaurants than order delivery, Cramer said, “I don’t think DoorDash will go away.” He also noted that as health and economic situations improve and the market for DoorDash expands, there could be more restaurants in the store. Cramer has temporarily closed his own restaurants in New York City because of the pandemic.
Despite the rise in DoorDash in 2020, Cramer said the business had worrisome aspects that warrant investor consideration.
“I think it’s more of a duopoly than before because of Uber Eats. Good deal. Good deal? I don’t know. It’s still a delivery system,” Cramer said. “They made a suburban footprint that is really brilliant, but … in the end we know that the moat is only as good as the fact that they are low-priced and have good technology.”