Waitr Stock Price Has Popped. Dead Cat Bounce Detected

The Waitr stock price popped by almost 50% on Friday this week as investors cheered the latest developments in the industry. The firm shot higher after reaching a deal with Burq, a company that offers delivery solutions for retailers. This was a continuation of a comeback that happened when Amazon took a stake in Grubhub. WTRH stock is trading at $0.35, which is about 160% above the lowest level this year.

The remarkable collapse

Waitr is a food delivery company that has partnered with many well-known brands in the US like Panera Bread and 7-eleven. It owns its eponymous Waitr brand and Bike Squad, a company it had to write down in 2021. It has over 26,000 restaurants in its platform and serves over 1.7 million diners.

Waitr has also expanded its services to payment processing. In it, it uses its software to process payments for companies mostly in the restaurant business. As such, it competes with companies like Square and Toast.

Waitr went public through a SPAC merger in 2018. At the time, it combined with a SPAC company by Tilman Fertitta. At its peak, the company had a market cap of over $559 million. Today, the collapse of the Waitr stock price has pushed its market value to about $55 million.

The firm has gone through a difficult time in the past few months as investors worry about various factors in the industry.

Why Waitr shares have collapsed

First, the company is operating in an industry that has become increasingly competitive in the past few years. Some of its biggest competitors are companies like Uber, DoorDash, PostMates, and GrubHub among others. Therefore, it is relatively difficult for the company to compete with these giant companies.

Second, Waitr, like other delivery companies, Waitr has seen the cost of doing business surge. For example, gas prices have jumped to over $5 in the US. This increase has led to both a slowdown in consumer demand and a higher cost of doing business. Indeed, Doordash’s stock price has collapsed by 58% in the past 12 months. In Europe, companies like Deliveroo and Just Eat Takeaway have all crashed.

Third, the lack of fiscal stimulus in the US has hurt demand for the company. In the first quarter of the year, the firm’s revenue dropped to $35 million from the previous $50.9 million. The firm attributed that decline to the lack of a stimulus. In the quarter, its adjusted EBITDA was a net loss of $1.8 million vs $8.3 million it made in the previous year. Its total loss jumped to over $77 million.

The Waitr stock price has also collapsed because of the ongoing transition from lockdown stocks to reopening ones. This is the same reason why companies like Affirm and Australia’s Zip collapsed in 2022. The hawkish statements by the Federal Reserve has not helped either.

Notably, the sharp decline of WTRH is in line with the performance of other SPAC companies. The Defiance Next Hen SPAC Derived ETF has collapsed by over 50%. 

Will Waitr recover?

Waitr faces an uphill task going forward and there are increased chances that it might not survive in the long term. First, the firm has continued destroying its balance sheet by acquiring multiple companies. Like we have seen with Block and AfterPay and Teladoc and Livongo Health, acquisitions can be costly mistakes. Indeed, the firm wrote down its acquisition of Bite Squad.

Second, the firm has been dilutive as ever. Data compiled by Seeking Alpha shows that the total diluted outstanding shares have risen from 61.5 million in 2020 to over 130 million. While this dilution has slowed, it will likely continue as interest rates rise.

Most importantly, there are reduced chances that any suitor will want to acquire Waitr Holdings. That’s because potential acquirers like Uber and Lyft are going through challenges as well.

Waitr stock price forecast

waitr stock price

The two-hour chart shows that the WTRH stock price has gone parabolic in the past few days. The rally started when Amazon took a stake in Grubhub and continued when it inked a deal with Burq. I believe that these events will not have a major impact on the company’s top and bottom line.

Waitr shares have managed to move above the 25-period and 50-period moving averages while the MACD and the Relative Strength Index (RSI) have shot higher. Still, I believe that the stock will resume the downward trend in the coming weeks. This rebound is merely a dead cat bounce, which is when a falling asset makes a brief comeback.

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