Stock Analysis & Ideas

DoorDash Stock Gains on New Milestone

Milestones are great for any company. For delivery service DoorDash (DASH), it’s no different. In fact, it’s a large part of the hefty 6% gain the company saw in premarket trading on Friday. Those gains held into Friday’s trading session as well.

I’m bullish on DoorDash, because it operates in a market that is not only resistant to recession, but also has already demonstrated interest backing it up.

DoorDash was in a sharp state of decline for the last several months. It made steady, if slow, gains through May to about November 2021. That’s when things turned around for DoorDash, and a decline kicked in. A bit of recovery followed, but it proved unsustainable, and now the company is back under $100 a share once more.

The latest news, meanwhile, should prove helpful. DoorDash posted its recent earnings report, and the picture was mixed overall. The company posted a loss of $0.48 per share, though Refinitiv projections called for a loss of only $0.41 per share. However, it posted a beat on revenue, coming in at $1.46 billion against projections calling for $1.38 billion.

The best news of all was that DoorDash breached the 400-million delivery milestone in this quarter, and has since passed it. It also added the most new customers to its lineup since 2021’s first quarter.

Wall Street’s Take

Turning to Wall Street, DoorDash has a Moderate Buy consensus rating. That’s based on 10 Buys and six Holds assigned in the past three months. The average DoorDash price target of $146.50 implies 100.1% upside potential.

Analyst price targets range from a low of $94 per share to a high of $230 per share.

Investor Sentiment Doesn’t Look Bright

The TipRanks 13-F Tracker, for its part, notes that hedge fund involvement with DoorDash is dropping. Hedge funds shed just over five million shares between the September and December 2021 quarters.

Insider trading is heavy on the sell orders. There was an upward trend in the last three months as insiders bought around $188 million in DoorDash stock.

However, in terms of number of transactions, the sellers were clearly out in force and have been for the last year. In the last three months, sell transactions led buy transactions 25 to 17. For the last 12 months, that ratio expands to 143 to 35.

Retail investors, at least those who hold portfolios on TipRanks, are making a minor comeback after a mass exodus. In the last 30 days, portfolios with DoorDash in them were down 4.1%. In the last seven days, they’re up 0.3%.

Recession Proof?

It would be easy to dismiss DoorDash as another pandemic darling. However, it became clear that Americans were still interested in takeout and delivery options, even after it was possible to sit inside a restaurant once more.

DoorDash CEO, Tony Xu, noted that customers were not “…substituting eating in with eating out.” There’s a good reason for this; note the gains in customers seen in the first quarter of this year with the first quarter of last year.

Both saw gains, and both feature some of the worst weather around. The notion that customers would be more interested in food delivery during the coldest and least pleasant parts of the year to be outdoors in just makes sense.

Certainly, DoorDash’s future revenues will take something of a hit. Discretionary income can be applied to food purchases as well; going out for steak is less of an option when cooking your own hamburger is available too.

However, for those living alone, or those who don’t like to cook, DoorDash delivery is an option that covers a wide range of price options. That should help protect it against recession-induced downturns.

There will be other problems for DoorDash going forward, as well. Finding drivers will be a challenge during a labor market that’s tighter than it’s been in decades.

Rising food prices will scare off some customers. Rising fuel prices will make it more expensive for DoorDash and its drivers.

Yet, at the end of the day, DoorDash is still carrying food from place to place. That means its recessionary hit will be inherently limited. Plus, in the worst case, DoorDash can pivot and focus more on other kinds of delivery.

DoorDash already works with a range of convenience and variety stores, including drugstores like Walgreens (WBA). If the restaurant trade declines substantially, some quick reminder advertising can get new customers interested in more vital goods.

Concluding Views

DoorDash will face some challenges going forward. Yet it also has a wonderfully diversified customer base that should help ensure steady revenue over the years. It’s a company that serves almost as well in bust as it does in boom, and that’s seldom a bad play.

Throw in the terrific upside potential and the current attractive pricing that’s well off even the average price target, and things get better from there. It’s all these factors together that make me bullish on Doordash, which provides vital and not-so-vital goods alike for convenient delivery all over.

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