On Thursday, MoffettNathanson raised its rating on DoorDash Inc. (NASDAQ: NASDAQ:DASH) shares from Neutral to Buy, alongside a significant increase in the price target to $164 from the previous $118. The firm's positive shift in stance comes after acknowledging that the potential risks associated with student loans, which had previously prompted a downgrade, did not materialize as expected.
The firm highlighted that DoorDash has continued to gain market share in both restaurant and grocery delivery sectors, according to their latest industry tracker. This increase in market share, coupled with a growing adoption of grocery delivery services, has led to an upward revision of the firm's consolidated order estimates for DoorDash by 5% and 8% for fiscal years 2025 and 2026, respectively.
MoffettNathanson also anticipates DoorDash will outperform profitability expectations compared to the consensus. They predict that adjusted EBITDA will surpass consensus forecasts by 10%, 24%, and 37% for fiscal years 2024, 2025, and 2026, respectively.
This is partly due to the firm's refined segment model, which showed that losses in DoorDash's New Verticals and International segments were 20% larger than previously estimated, suggesting room for positive adjustments as these areas improve.
The firm remains optimistic about the U.S. Restaurant Delivery market, despite some ongoing investor skepticism regarding the industry's growth potential. They see significant opportunities, noting that current bookings only represent 8% of the total addressable market. Additionally, consumer trends show a consistent increase in spending on prepared food relative to groceries, year over year.
In the grocery delivery space, MoffettNathanson expects DoorDash, along with Amazon (NASDAQ:AMZN) and Walmart (NYSE:WMT), to capture market share from Instacart (NASDAQ:CART) and other retailers within the $2 trillion addressable market of U.S. consumables. The upgrade reflects confidence in DoorDash's ability to leverage these opportunities and continue its growth trajectory in the coming years.
InvestingPro Insights
Following MoffettNathanson's upgrade of DoorDash Inc. (NASDAQ: DASH), it's pertinent to consider key financial metrics and analyst insights from InvestingPro. DoorDash's market capitalization stands robust at $55.42 billion, reflecting its significant presence in the delivery industry. Despite a high Price to Earnings (P/E) ratio of -95.63, which indicates investor optimism for future earnings, the company's revenue growth remains strong, showcasing a 31.17% increase over the last twelve months as of Q4 2023. This aligns with MoffettNathanson's positive outlook on the company's market share expansion and order estimate revisions.
InvestingPro Tips underscore the company's financial health, highlighting that DoorDash holds more cash than debt on its balance sheet and is expected to see net income growth this year. This could reassure investors about the company's capacity to sustain its growth and manage liabilities. Additionally, the stock has experienced a significant return of 118.42% over the last year, which may attract investors looking for high-growth opportunities. However, it's worth noting that analysts predict the company will be profitable this year, which could be a critical turning point for DoorDash's financials.
With 13 additional InvestingPro Tips available for DoorDash, investors can gain a deeper understanding of the company's prospects and make more informed decisions. For those interested in accessing these insights, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at https://www.investing.com/pro/DASH.
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