If you're perplexed as to why DoorDash (NYSE: DASH) stock is having such a hard time in the market - insider selling is to blame. While the stock has a low float and only 58% of shares are tradable, insiders have been unloading them at a rapid rate.Insiders made 79 transactions in the last year, totaling 32.4861 million shares. That's about 10% of the overall stock or roughly $5.655 billion in value. That is a lot of money to remove from the market, and it's equal to about 12.5% of the market capitalization if shares trade at $133.50. It's a veritable alphabet soup of executives and directors selling it, so no one person can be blamed.
On the other side, the institutional activity indicates that prices and new all-time highs are on the way. Although activity has decreased considerably during the previous two to three quarters, the net of activity is positive, and total ownership is remarkable. In reality, institutional investment activity in the previous year was $54.4 billion to the good in favor of ownership, with overall institutional ownership exceeding 75% of shares available. That, coupled with the 15.5 percent held by insiders, implies a company that is extremely well controlled.
Analysts Still Like DASH
DoorDash is regarded as a weak Buy by the experts, but there are two things to consider in the data. The first is that over the previous year, sentiment has been edging higher and has moved from a firm Hold to a weak Buy, with the first activity of 2022 is bullish. With a price target of $256, Outperform has been assigned to the stock by analysts with Evercore ISI. That compares favorably to the $226 consensus rating, which indicates a 70% chance of upside for the company and a recent target increase.Bank of America set a lofty $270 price target on the heels of the prior earnings report, when they reaffirmed their Buy opinion. That goal is 20% greater than the consensus objective.
The stock is a structural winner in the pandemic, according to Evercore ISI, which called it a fast-growing business in non-restaurant delivery. Analysts are betting that the company's performance will improve when it reports results for the fourth quarter on February 16th. Analysts anticipate sales of $1.28 billion, which would be a 30% year-over-year increase and a 0% sequential drop. We think they're underestimating the growth in earnings during the pandemic, Omicron's spread, or digital and eCommerce trends' stickiness.
Shorts Aren’t Helping
DoorDash has a high short-interest rate of 5%, which is aiding in the price decrease. Even so, the short-selling effect is more owing to Jim Chanos's high-profile announcement of his position than anything else. He thinks the company's price has gotten out of hand, and he may be correct. The firm's shares have risen more than 400X in recent years, implying that it will need to develop its revenue and earnings by triple digits in order for the ratios to return to normal.
The good news is that the DoorDash stock has bottomed. The ugly truth is that insider selling and short interest may continue to keep shares depressed in the near to mid-term until the firm can demonstrate it can produce consistent earnings. Until then, we anticipate DASH to stay at these levels and perhaps rise a bit higher until the next earnings announcement. At that time, the results and prospects might have a significant impact on trading.