For DoorDash and Airbnb, More Isn’t Necessarily Merrier

Day traders aren’t rushing into these names just for the fun of it. Low interest rates have almost forced anyone looking to make meaningful returns this year into the public markets, explaining in part the record number of blank-check companies that have recently listed. But this week’s traditional listings seem to be at the center of all that is trending in 2020, most notably the acceleration of the shift toward online commerce.

The pandemic has made businesses which have brought safety and ease to how we travel and eat seem not only attractive but essential in the near term. And as opposed to fellow unicorns like Uber and

Lyft,

who have yet to turn a profit, both DoorDash and Airbnb have managed to turn a profit on a select basis for some period of the year and have outshone their competitors.

With so many consumers fleeing the big cities over the last several months, Airbnb has pared down its ambitions to become a broader hospitality conglomerate to emphasize its homestay accommodations in more remote locations. DoorDash has welcomed the urban exodus with open arms, having built their business to capitalize on suburban markets from the beginning.

It isn’t necessarily superior economics that have made these companies successful relative to their peers lately; they have simply seen demand where others haven’t. Therefore a bet on both DoorDash or Airbnb today has to be a bet that many pandemic-related trends, such as urban decamping and remote work, are less situational and more secular in nature.

So what happens if life as we knew it comes back? While DoorDash was growing rapidly before the pandemic set in, even its early investors have publicly acknowledged that its monster sales growth this year has had a lot to do with suburbanization. Interestingly, while Airbnb has touted its presence outside of major cities, the majority of its listings seem to be around major metropolitan areas. Post-pandemic, its business will once again have to compete with the amenities offered by hotels that many travelers have really missed.

Word of Airbnb’s opening share price on Thursday brought Chief Executive Officer

Brian Chesky

to a loss for words in a Bloomberg interview, before he finally abandoned hope of eloquence and acknowledged that with a higher stock price comes higher expectations.

At some valuation the odds are stacked against these newly minted public companies no matter how the chips fall.

Write to Laura Forman at [email protected]