DoorDash just missed Q4 estimates, but upbeat Q1 outlook makes the stock a double-digit pre-market gainer today. The food delivery industry is fiercely competitive, but judging by its market share, net cash position and 38% revenue growth last quarter, the company looks well positioned to succeed. Investors have been skeptical lately, however, as earlier this week the stock was down 45% from October’s all-time high. The question is, are today’s gains part of a new sustainable uptrend or merely a dead cat bounce within the ongoing sell-off? The chart below gives us an Elliott Wave reason for optimism.
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It shows that the post-pandemic surge from the low-$40s to over $285 per share was a textbook five-wave impulse. We’ve labeled the pattern (1)-(2)-(3)-(4)-(5), where the five sub-waves of all three motive waves are also visible. According to the theory, a three-wave correction follows every impulse, and that’s exactly what happened to DoorDash.
The recent decline, which cut the company’s valuation nearly in half in just four months, can be seen as a simple (a)-(b)-(c) zigzag correction. It has already reached the support area of wave (4). Given the positive reaction to what could’ve easily been interpreted as a disappointing Q4 report, the bulls seem eager to return. If this count is correct, the uptrend can be expected to resume and eventually lift DoorDash stock to new record highs in the months ahead.
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