DoorDash (DASH) Stock Signal: Is A New Sell-off Brewing?

A dismal return on invested capital, years of negative net income, and substandard operating margins make a bearish investment case for DoorDash. Is a new sell-off brewing?

Short Trade Idea

Enter your short position between $268.14 (Friday’s intra-day low) and $278.15 (the upper band of its horizontal resistance zone).

Market Index Analysis

• DoorDash (DASH) is a member of the NASDAQ 100 and the S&P 500 indices.
• Both indices defy a multitude of concerns and eek out fresh all-time highs amid growing bearish conditions.
• The Bull Bear Power Indicator of the S&P 500 shows a negative divergence and does not support the uptrend.

Market Sentiment Analysis

Equity markets continue their dangerous advance, fueling the AI bubble, and banking on more aggressive interest rate cuts by the Fed. When all news is good news, investors should consider current conditions and re-evaluate their portfolios. Futures are pointing higher, and the last few months resemble the summer of 2007, leading up to the global financial crisis of 2008. Investors are funding all AI projects, despite a 95% failure rate and the expected tremendous revenue shortfall compared to massive investments.

DoorDash Fundamental Analysis

DoorDash is the largest food delivery company in the US, with a market share of 56% and a 60% market share in convenience store deliveries. It caters to over 450,000 merchants, over 20,000,000 users, and employs over 1,000,000 couriers.

So, why am I bearish on DASH, despite its six-week rally?

Valuations are excessive, operating margins are weak, and DoorDash flirts with becoming a meme stock. The health of the consumer, despite its ongoing resilience, is another area of concern, while wage pressures harm the already fragile balance sheet. The development of its first delivery robot, conducted in-house by DoorDash Labs, is another capital-intensive project with long-term benefits, but short-term capital requirements.

DoorDash Fundamental Analysis Snapshot

The price-to-earnings (P/E) ratio of 149.85 makes DASH an expensive stock. By comparison, the P/E ratio for the S&P 500 is 30.26.

The average analyst price target for DASH is $298.19. This suggests decent upside potential, but downside risks have risen notably.

DoorDash Technical Analysis

Today’s DASH Signal

DoorDash Price Chart

• The DASH D1 chart shows price action entering its horizontal resistance zone.
• It also shows price action between the ascending 0.0% and 38.2% Fibonacci Retracement Fan level.
• The Bull Bear Power Indicator is bullish with a descending trendline, approaching a bearish crossover.
• The average trading volumes have been higher during bearish days than during bullish days.
• DASH advanced with the S&P 500 index, a bullish confirmation, but bearish pressures have accumulated.

My Call on DoorDash

I am taking a short position in DASH between $268.14 and $278.15. High valuations, shareholder value destruction, weak operating margins, the absence of a dividend, and negative net income paint a bearish picture, suggesting danger ahead.

• DASH Entry Level: Between $268.14 and $278.15
• DASH Take Profit: Between $233.11 and $238.20
• DASH Stop Loss: Between $283.71 and $292.22
• Risk/Reward Ratio: 2.25

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