California-based DoorDash (DASH) offers on-demand food ordering and delivery services in more than 7,000 cities across the U.S., Canada, Japan, and Australia.
In an expansion move, DoorDash has agreed to acquire Wolt Enterprises, a Finland-based food delivery platform that operates in 23 countries. The all-stock deal of €7 billion is expected to close in the first half of 2022.
With this in mind, let’s take a look at DASH’s financials and understand what has changed in its risk factors. (See Insiders’ Hot Stocks on TipRanks)
Q3 Financial Results
DoorDash reported revenue of $1.3 billion for third quarter of 2021, surpassing the consensus estimate of $1.2 billion. The company had reported revenue of $879 million in the same quarter last year. Marketplace GOV increased 44% year-over-year to $10.4 billion.
During the quarter, the company posted a loss per share of $0.30, missing the consensus estimate of $0.28 loss per share. It has posted a loss of $0.96 per share in the same quarter last year. DoorDash ended the third quarter with $2.9 billion in cash. (See DoorDash stock charts on TipRanks).
According to the new TipRanks’ Risk Factors tool, DASH’s main risk category is Finance & Corporate, which accounts for 41% of the total 79 risks identified for the stock. Recently, the company updated its risk profile with five new risk factors related to the pending Wolt acquisition deal.
The company has informed investors that it may not succeed in acquiring Wolt. The company has cited many reasons that could cause the deal to collapse, including failure to obtain regulatory approvals and lawsuits challenging the agreement. If the deal collapses, DoorDash may be required to pay €210 million in termination fee to Wolt. Moreover, the company will incur acquisition-related costs regardless of whether the transaction goes through. The company has warned that any failure to close the acquisition could adversely impact its business, financial condition and stock price.
DoorDash has cautioned investors that although it has conducted due diligence on Wolt, there may be hidden liabilities that could be uncovered later. This could result in write-offs and unanticipated costs.
The company tells investors that even if it succeeds in closing the Wolt acquisition, it could experience difficulties in achieving the anticipated benefits of the merger. DASH further highlights that the integration of Wolt into its system could run into challenges because of the differences in management ideologies and corporate cultures.
Finally, DoorDash underlines that after closing the Wolt acquisition, its international operations will account for a greater portion of its overall business than they do currently. As a result, the company’s exposure to fluctuations in forex rates will increase and may adversely impact its financial results.
The Finance & Corporate risk factor’s sector average is at 44%, compared to DASH’s 40.5%. Shares of the company have gained about 59% year-to-date.
Following DoorDash’s third-quarter earnings report, Truist analyst Youssef Squali reiterated a Buy rating on the stock and raised the price target to $260 from $250. Squali’s new price target suggests 14.33% upside potential.
The analyst observed that DoorDash delivered strong third-quarter results and that the momentum would continue into the fourth quarter.
Consensus among analysts is a Moderate Buy based on 9 Buys and 9 Holds. The average DoorDash price target of $238.50 implies 4.87% upside potential to current levels.