Nearly every aspect of our lives has been transformed in 2020. But there are few places where the change has been as dramatic or all-encompassing as in the stock market. Mentioned in today’s commentary includes: DoorDash, Inc. (NYSE: DASH), Uber Technologies, Inc. (NYSE: UBER), Airbnb, Inc. (NASDAQ: ABNB), Lyft, Inc. (NASDAQ: LYFT), Grubhub Inc. (NYSE: GRUB).
As any trader will say, fundamentals in 2020 appear to have become almost entirely irrelevant, ESG investing is now the single biggest trend impacting stocks, and traditional industry giants are under attack. But while all of that was going on, another remarkable trend has taken over stock markets – the billion-dollar stock boom.
From Airbnb (ABNB), to DoorDash (DASH), Facedrive (FD.V ; FDVRF) and Tesla, public markets are sending a certain type of company soaring beyond the competition – and investors who listen are creating multi-generational wealth.
The Billion Dollar Secret
So what is it that all these companies have in common? Why are they worth such a premium on the public market? And who are the experts on this new trend?
First and foremost, this is a phenomenon that is fully focused on tech stocks. More specifically, it is focused on tech stocks with an ambitious promise, an ESG focus, and a big pull amongst millennial and Gen Z investors. That final part, as it will soon become clear, is of vital importance.
The way that each of these companies has managed to secure such a premium on the public market is by targeting a huge group of relatively new and extremely loyal investors who are holding for the long term. This is a recent phenomenon, but one that each of these companies has taken advantage of in a big way.
Surprisingly, the experts on this trend aren’t the big banks, hedge funds, or market analysts. Instead, it is a group that Jim Kramer recently described as “probably more powerful than any single investment firm right now”. Specifically, Kramer was referring to a Reddit group called Wall Street Bets, but the real trend is slightly bigger than that, a new group of millennial and Gen Z investors trading on platforms like Robinhood and sharing investment advice in the form of memes and TikTok videos.
While many may not have the time to submerge themselves in an entire internet subculture, it is certainly worth the time to understand why these stocks have soared in 2020.
What’s Special About These Companies?
On the day of its much-hyped IPO, DoorDash jumped from $102 to $189 for an increase of over 85% in a single day. Facedrive (FD.V ; FDVRF) soared from $2 to nearly $25 at its peak and is currently sitting at a 647% increase over the year. Airbnb was nearly an exact replica of the DoorDash IPO, soaring from $68 to $160 in a single day, marking a 135% rise. Tesla arguably the most impressive of the lot, has seen nearly a 600% return this year from what many traditional investors already considered an overvalued price.
Each of these stocks was a favorite amongst young investors who value community, environment, tech, and accessibility. Of the four, Facedrive is probably the best example of what modern investors are looking for. It sells itself as a ‘People and Planet First’ business that is attempting to become the world’s first ESG tech ecosystem.
Just like Tesla, Facedrive (FD.V ; FDVRF) is determined to make electric vehicles mainstream, with an EV subscription service that will make these ‘luxury vehicles’ accessible to the masses. It is also challenging Uber and Lyft in the multi-billion-dollar ride-sharing sector, where it is the first emissions-free service available. It not only offers EV and hybrid-cars to these customers, but it offsets any emissions from traveling in a gasoline-powered car.
When the food delivery service boomed during COVID, DoorDash took advantage of the opportunity to gain popularity amongst modern investors. But it isn’t just the ease and accessibility of ordering home that drew younger investors, DoorDash was also determined to ensure it gave back to small business. It’s recent pledge to invest $200 million in the communities it works in made that clear. But Facedrive wasn’t far behind here either. It’s emissions-offset, community-focused food delivery service saw its orders soar 25% in a single month as consumers looked for an ethical alternative to the majors.
Finally, Airbnb is the ultimate ‘community’ stock for modern investors – who are far more likely to buy into the idea of communal living and house sharing than big hotel companies owned by multi-billion-dollar conglomerates. It may have its issues, but the story it tells is one that Wall Street Bets and investment TikTokers can get behind.
Airbnb has been one of the most disruptive forces in travel and vacation accommodation. And it’s received a lot of push back from the establishment over the years though that hasn’t kept the company from expanding. Since 2009, Airbnb has seen a global compound growth rate of 153%, with over 2 million people staying in an Airbnb rental on any given night.
Since its IPO on December 10th, the company’s stock price has been particularly volatile, dropping from the mid-$140 range to a low of $124 before bouncing back to its current price. But have no fear, despite short-term volatility, the company is well positioned to see significant growth in the coming years.
Similarly, on this ‘community’ trend, Facedrive (FD.V ; FDVRF) has invested heavily in a COVID-tracking system that it is using across all of its verticals to ensure the safety and well-being of all its clients and users. It has already partnered with the Ontario government and AirCanada in an attempt to make sure local communities can survive and recover from the global pandemic.
All of these companies have sold the dream of a better, cleaner, and more connected world to investors. The tech element of each of these stocks means that the sky truly is the limit when it comes to expansion, so investors will continue to dream… and continue to hold.
Uber Technologies (UBER) was one of the most exciting and watched IPOs of the past decade. Not only is it the most popular ride-sharing application in the United States, but it has also branched out into on-demand scooters and bicycles. But nothing is doing as well in this crisis as its Uber Eats brand. The company’s food delivery platform has been booming as stay-at-home orders across the globe close down restaurants.
It’s worth noting, however, Uber’s market share dominance has come at a price. The company’s finance strength is suffering, and its profitability rating is abysmal. The company has spent billions undercutting its competition and rolling out campaigns to provide discounts to secure new customers.
“It’s become clear that we have a hugely valuable hedge across our two core businesses that is a critical advantage in any recovery scenario,” Uber CEO Dara Khosrowshahi said, adding “When travel restrictions lift we know the mobility trips rebound. If restrictions continue or need to be re-imposed our delivery business will compensate.”
Despite some of its profitability challenges, however, Uber has had a stellar year. After falling to just $14 in mid-March as lockdowns swept the world, the company’s share price has skyrocketed by 278%, currently sitting at $53.
Lyft (LYFT) is another one of the more-hyped IPOs of recent years. As Uber’s top competitor, it has worked hard to carve out its own position in the U.S. marketplace. And this year, it launched its own delivery service. Not only will Lyft allow customers to order food from their favorite restaurants, they can even place grocery orders. The “Essential Deliveries” program aims to not only help the community stay safely indoors, but it also helps support its some-120,000 drivers in the United States.
“As communities shelter in place, the need for items to be delivered to the doorstep is at an all-time high,” said Lisa Boyd, Director of Social Impact at Lyft. “Whether it’s meals for high-risk seniors or medical supplies for individuals with a medical condition, Lyft’s community of drivers is ready to help meet the needs of our communities while earning additional income.”
GrubHub (GRUB) was America’s dominant food delivery force for some time, but like Uber, it spent a lot to get its market share to that point. This put its initial IPO in a precarious position, though it has seen tremendous success since. Not only that, it’s received a lot of criticism for the layers of fees it places in every order. While customers don’t see most of what restaurants are being charged, restaurant owners find the service difficult to work with, as the fees cut significantly into their own profits.
Natt Garun in an article for The Verge wrote, “Though Grubhub is upfront with businesses about the terms, the move is being criticized as an attempt to profiteer from business partners that are struggling under the nationwide measures to limit the spread of the novel coronavirus.”
But these complaints did not fall on deaf ears. GrubHub has taken the criticism to heart, and is now offering restaurants a new way to receive orders. All without the massive commission fees it usually takes.
“Even though we may fulfill the order and be the back-end technology, because we’re not providing the marketing service there, we’re not taking a commission,” said Chief Revenue Officer Seth Priebatsch.
Thanks to its efforts, GrubHub has remained one of the less volatile giants in the delivery business. That’s not to say it hasn’t seen some growth over the year, however. GrubHub’s stock increased from $47.24 at the beginning of the year to $72.35 at today’s price, representing an increase of 53%.
DoorDash is a veteran in the food delivery business. Founded in 2012 in California’s Silicon Valley, the company has fought tooth and nail to become the top third-party delivery service in the United States. In addition to its food delivery dominance, DoorDash is also jumping on top of a brand-new emerging market: ghost kitchens.
Ghost kitchens, sometimes called virtual kitchens or dark kitchens, have exploded during 2020 as the COVID-19 pandemic has forced many restaurants to close their doors, and DoorDash has been on top of it every step of the way. The delivery-only ghost kitchen alternative, however, has allowed restaurants and ambitious would-be chefs to avoid high cost real-estate in high traffic areas and even expand their business into new neighborhoods at a low cost while using services like DoorDash or UberEats to reach their customers.
DoorDash stock surged on its first day of trading by as much as 86%. Since then, however, the company’s stock price has fallen back to earth, finding stability in the $155 range. But as the world gears up for a future “on demand,” companies like DoorDash, which have been on the cutting edge of convenience from the very beginning, stand to make the most of this new consumer-driven reality.