This post was originally published on this site
The analysts upgraded the stock to Buy from Neutral and set a new price target of $105 (from $90), suggesting nearly 30% upside from Friday’s closing price.
“We ran a deep dive across all key metrics and, post analysis, we feel confident that Gross-Order-Value (GOV) growth rate should outperform guidance and Street expectations in 2H23,” they commented. “We believe key drivers include continued market share gains from its category-leading position in the US, and rational competition in Europe. In conjunction, moderated food inflation and resilient consumer spending provide incremental support to our view.”
The analysts believe FY23 Gross-Order-Value (GOV) guidance growth at 21% appears conservative, given DASH’s strong market share gains across all categories, including US and international restaurants and grocery delivery. DASH’s leading position in US food delivery and profit reinvestment into less competitive areas contribute to this. Consumer spending remains robust, with moderated food inflation (food away from home down nearly 200 bps YTD) and strength in lower-income demographics due to higher wages. They expect FY23’s exit rate to reach 18%, exceeding the mid-teens implied GOV growth guidance, with this growth likely to continue into FY24.
Key unit economics drivers (Dasher pay/acquisition and customer acquisition costs) remain favorable due to increased labor supply and rational competition, the analysts note. Improved delivery efficiency and increased advertising adoption contribute positively. Disciplined spending in headcount and Dashmart supports strong EBITDA, with their FY25 forecast almost 10% above consensus. DASH can invest in new categories, having reinvested 30% of US restaurant business profits in 3Q22, with this level expected to remain stable. Any rationalization will immediately boost the bottom line.
The analysts add that the current valuation, at 15x FY25/EBITDA, “does not reflect the potential for high-teens growth exiting FY23 and into FY24.” The new price target of $105 represents 19x their new FY25 EBITDA forecast.
Last week, DoorDash announced it would transfer its listing to the Nasdaq Stock Market from the New York Stock Exchange. The move is expected to be completed as trading starts on September 27, 2023.
Shares of DoorDash are up 66% year-to-date.
