Jim Cramer sees “lost money” in technical IPOs and says not to chase DoorDash

CNBC’s Jim Cramer on Wednesday believed he was “lost money” interested in upcoming technology IPOs, but urged younger investors not to chase DoorDash after a third-party delivery company goes public.

“When people know the brand, younger investors just say, ‘You know what, get me,'” Cramer said on “Squawk on the Street.” DoorDash is used by many younger people, both in the suburbs and in the suburbs. in the cities, so I think you will experience incredible enthusiasm. “

DoorDash, which began trading on Wednesday, sold its shares at the first publicly traded stock price of 102 per share, exceeding the target range of $ 90 to $ 95. The stock later opened at $ 182 per share, bringing DoorDash’s market cap to $ 57.8 billion.

Prior to its opening, Cramer encouraged young investors to be cautious about chasing equities. The “Mad Money” presenter previously advised investors to buy it for only under $ 100 per share.

“I don’t want them to lose their discipline because that’s when we start going into a 1998, 1999 period,” Cramer said, referring to the speculation about the technical stocks that fueled the dot-com bubble.

DoorDash is the first IPO in a year-end consumer technology wave that includes Airbnb’s online home rental market expected to debut on Thursday. Robinhood, an online stock trading application also popular with younger investors, is said to have commissioned Goldman Sachs to lead a potential IPO next year.

There’s only a general desire for public offerings from tech companies, Cramer said. “There’s a lot of money, lost money. I think there’s money that basically says, ‘I don’t really care what the opening price will be,’ he added.” Many of these market buyers won’t have much discipline. They will not set a price cap on it. ”

DoorDash in particular saw a huge increase during the coronavirus epidemic, with more consumers choosing to deliver food home due to home orders. The company’s orders totaled $ 16.5 billion in the first nine months of this year, compared to $ 5.5 billion in the same period in 2019.

Many people on Wall Street are wondering what will happen to the DoorDash business if the worst of the pandemic subsides.

While acknowledging that people are choosing a restaurant dinner instead of ordering delivery, Cramer said, “I don’t think DoorDash will pass.” He also noted that there may be more restaurants in business as the health and economic situation improves, expanding the DoorDash market. Cramer temporarily closed its own restaurants in New York City due to the epidemic.

Despite the boom in DoorDash in 2020, Cramer says its business has worrying aspects that warrant investor attention.

“I think it’s more of a duopoly than before because of Uber Eats. Good deal. Big deal? I don’t know. It’s still a delivery system,” Cramer said. “They made a suburban footprint, which is really brilliant, but … in the end, we know that moats are only as good as the fact that they’re low in price and good in technology.”