It is generally the case that when analysts reconsider a stock for the better, its fortunes improve. However, that’s not always how it works, as food delivery stock DoorDash (NASDAQ:DASH) lost fractionally in Friday morning’s trading despite an analyst upgrade.
The less-than-helpful upgrade came from Piper Sandler, which hiked its rating on DoorDash from Underweight to Neutral. It also nearly tripled its price target from $53 to $127. The reason? Piper Sandler’s research points to a combination of readily available labor and rising demand.
That, when coupled with some growing improvements in innovation, gives DoorDash plenty of room for growth. Better still, Piper Sandler notes that the on-demand delivery market is still on the rise, and that trend is likely to continue.
DoorDash Isn’t without Headwinds
To suggest that DoorDash is without headwinds would be irresponsible. First, there’s a political climate that’s increasingly averse to gig work, which Piper Sandler didn’t seem to note. The Biden Administration is under fire for new rules specifically targeting gig workers and is already being sued by several organizations that deal in independent contracting for labor, like trade groups and trucking companies.
Meanwhile, there’s a problem with the primary provider of delivery food: restaurants. Even McDonald’s (NYSE:MCD) is losing ground in the low-income sector, which is its primary market. When a Big Mac combo runs $18 in some places, it’s a safe bet many won’t be calling DoorDash to bring one over.
Is DoorDash a Good Buy Right Now?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on DASH stock based on 15 Buys and nine Holds assigned in the past three months, as indicated by the graphic below. After a 118.24% rally in its share price over the past year, the average DASH price target of $130.74 per share implies 0.98% downside risk.
