Are some industries just plain out overrated? Can some just be considered part of some larger greater fool theory?
I am beginning to wonder if that is the case in some of the stronger stock sectors that may turn out to be less than meets the eye.
My jaundiced nature's reacting first to the idea that Toast, a point of sale company, could be the next big thing. Goldman's been tapped to do the deal; they are talking a $20 billion valuation. In February of last year, before the pandemic mind you, it raised money at a $4.9 billion valuation.
Let me tell you something about point of sale. When our restaurants were thriving we had people banding into us constantly to try to get us to switch to their point of sale system. I looked at a bunch of them. Let me tell you the one I was most partial to: the one who was willing to give me a fabulous deal because from my point of view, other than Square (SQ) , which would advance cash if we needed it - we didn't - they all did pretty much the same thing.
There aren't many parts of a restaurant where you have any leverage unless you have scale and heft. You aren't going to get a break on liquor or on fine meats or fish. Ecolab's (ECL) not going to give you a discount on cleaning materials. When delivery was more fractured you could ask for a little more juice. However, that ended during the great consolidation.
But point of sale? I was shocked at how quickly these guys folded on price. Of course, I wanted our banks to do point of sale. Nope. They just can't do fintech to save their lives sometimes. Then I wanted something that would integrate with all my other bills, the kind of thing that I am bringing in with Bill.com (BILL) , one of my favorite stocks, because the sheer number of vendors I owe at one little restaurant is preposterous.
No matter. Toast will go off as something that's incredibly valuable and loved by people who have never even been behind a register or handled a payroll or figured out touchless during a pandemic. Maybe it will be viewed as the ultimate "opening" story because restaurants might soon come back.
Nevertheless, I question how this valuation can stand up under any close scrutiny fully knowing that the brokers will no doubt price it below where it will go, maybe much below, and limit the amount of stock that comes public so it turns out to be hot and look like some sort of foolish skeptic. Let's put it this way: it's easier to make money with the stock than it is with the company.
Speaking of "getting expensive" I think that the stock of DoorDash (DASH) , a company that at one point might not even look like it could come public because of its losses, may soon be threatened not by more restaurants but by more vaccines. Another insight I have gleaned in seven years in the restaurant business: as much as people like to have food delivered at home, it is with the exception of a handful of cuisines, notably Asian and pizza, a distinctly second-rate experience. Don't get me started on how much I hate takeout from a restaurant point of view, especially when our profits come from our mixed drinks.
Even if we made money on food, which we don't - it is a goodwill gesture and a chance to get our very nice bag used outside for advertising - the chances of a bad meal increase exponentially with delivery. Our Mexican food has a half life of about 15 minutes before most of the dishes just aren't as good as if you have them at the restaurant. I am debating charging more money for delivery to encourage you to come into Bar San Miguel when we re-open if only because I need the darned quality control.
No matter, DoorDash, the stock, acts as if we aren't sick of being cooped up, as if like being cooped up.
Does that mean Uber (UBER) is worth too much? I have been thinking about this and thinking about this and it's pretty clear that the delivery side is going to take a hit but at least the mobility side can more than make up for that. Lyft (LYFT) ? Tougher. In the end I think that these still need autonomous drivers and are really only working right now because their workers are making a lot less than they should. Is that sustainable?
I wouldn't want to wait around to find out.
