Downtrodden DoorDash Stock Still Has a Viable Path to Success

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The saying “fool me once, shame on you; fool me twice shame on me,” is very true. Investors in DoorDash (NYSE:DASH) stock would have done well to know that old adage. DASH stock has pulled the rug from under its investors twice already in its short public life.

Close up of Doordash logo and symbol displayed at the entrance to one of their offices
Source: Sundry Photography / Shutterstock.com

The first rally was into the January 2021 peak. DASH crashed from its $256 dollar high in a fantastic fashion. By early May, it had fallen to $110 per share.

Investors on Wall Street found it fit to repeat the rally and commit the same mistakes again. By November, DoorDash investors had already pushed it back to its all-time highs. Then the stock reversed on a dime into another crash still unfolding.

Here’s a simple trick to help you avoid chasing at the wrong time. Before taking a bullish position in a stock, simply look left on the chart. If you find yourself buying at a place where it had collapsed a few months earlier, stop.

What followed for DASH was a correction even harder than the one before it. It not only reverted to the base, it lost even more.

DASH Stock Has Work to Do

DoorDash (DASH) Stock Chart Showing Potential Path to Success
Source: Charts by TradingView

Now investors are struggling to recover the $100 mark. This is purely a psychological level and it lingers above us. The bears are in complete control of the price action in the stock. Therefore, it is now up to the bulls to take it back. The underlying assumptions for investors must be that rallies will face selling pressure. So book short-term trade profits often and faster than normal.

The way to get out of this descending trend is to first stop making new lows. That has not yet happened yet; therefore, job one this week is to hold above $92 per share. Next comes the task of exceeding prior failures. For DASH stock that’s the zone around $118 per share. If investors are able to do this, then they will have to repeat the process at every prior ledge. The largest resistance zones are around $140 and $160 per share.

But before investors can look up, they must make sure they stop the slide. Management will have the opportunity soon enough to give the bulls reasons to rejoice. Fundamentally, the financial metrics are not horrific. The income statement shows incredible growth. This should encourage the long-term bulls in DASH stock. Therefore, from an investment perspective, DASH at these level makes for a reasonable investment thesis.

The Fundamental Argument Is Not a Con

Technically this could also double as a short-term swing trade opportunity for a snap back rally. There are no signs for it; therefore, the risk size should remain low. I would not trust in the supports until I see evidence of improvement. Statistically, this is not an expensive stock because it has a price-to-sales ratio of 6.9x. But when a company loses as much money as this, it’s hard to argue for fundamentals.

Luckily, they have a net positive cash flow from operations, which means they’re not bleeding to exist. The financial metrics do not have any flagrant fouls in them. Therefore, this might be the case where it just needs time to earn its kudos on Wall Street. The growth rate even on the quarterly basis still remains strong. The habits that consumers developed during the pandemic have lingered going forward.

The services they provide are a viable basis for the business in the long term. Much like buying it at $250 per share was wrong, selling it at these new lows would not be smart. If I have not capitulated out of it yet, I missed the opportunity to panic out. Conversely if investors want to take an upside bet, they should have the confidence to do so with proper stops. Overall the indices are still nervous, so there could be extrinsic risk from that. In uncertain times like this, it is also smart to keep the risk size smaller than normal.

On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Nicolas Chahine is the managing director of SellSpreads.com.

Nicolas Chahine is the managing director of SellSpreads.com.


Article printed from InvestorPlace Media, https://investorplace.com/2022/02/downtrodden-dash-stock-still-has-a-viable-path-to-success/.

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