Slotting right into 2020’s frothy stock market, DoorDash (DASH) made its public debut on Wednesday, with shares soaring by 86% in its maiden session.
The food delivery service industry has been on a roll in 2020, as the coronavirus has caused a surge in demand. DoorDash leads the way, owning the lion’s share of the U.S. market, ahead of rivals UberEats, GrubHub and Postmates. It is likely to see out the year with orders up by over 200%. But it remains to be seen whether the popularity will persist once vaccines become widely available and the pandemic fades from view.
For now, however, investors appear unconcerned with such matters, and have enthusiastically jumped on board.
While BTIG analyst Jake Fuller acknowledges DoorDash’s position as the “clear leader in US restaurant delivery,” the analyst takes a more measured approach.
“DASH pioneered the logistics delivery model and has come of age in the pandemic,” the 5-star analyst said, “But with the Day 1 surge we just can’t get comfortable on valuation.”
As a result, Fuller initiated coverage of DASH with a Neutral (i.e. Hold) rating. (To watch Fuller’s track record, click here)
Fuller has good things to say about DoorDash. For one, the analyst expects the company to keep on “growing through tough 2H21 comps,” while sustaining growth of between 20 to 25%. Additionally, Fuller says the company has “largely put to rest questions around profitability,” and believes 25-30% EBITDA margins are “achievable.”
Furthermore, while Fuller estimates DASH has a 40% share of the US food delivery market, its 8% overall penetration of the TAM (total addressable market) is pretty low, and “lower still when considering the broader US food and beverage opportunity.” This suggests much room for future growth.
Yet, when it comes down to the nitty gritty, DASH stock appears expensive already. That said, Fuller is well aware that in the current exuberant market, investors could send shares even higher.
“We could make a case to buy DASH where it priced, but the Day 1 close put it closer to the bull case than the base case we had penciled out pre-pricing,” Fuller summed up. “While valuation appears aggressive to us, we note that short-term catalyst flow is likely to be positive with the potential for upward pressure on numbers.”
Only one other analyst has posted a DoorDash review so far, recommending the stock a Buy. Therefore DASH has a Moderate Buy consensus rating. However, the analyst might as well have said Sell, as his $93 price target suggests a 50% downside over the next 12 months. (See DASH stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
