On Monday, Mizuho (NYSE:MFG) Securities sustained its optimistic outlook on shares of DoorDash Inc. (NASDAQ:DASH), increasing the company's price target to $200 from the previous $183. The firm continues to endorse an Outperform rating for the food delivery giant.
The adjustment follows a detailed analysis of DoorDash's operating metrics, which, according to the firm, supports the expectation that Gross Order Value (GOV) growth will be a primary indicator for the company's profitability prospects.
The analysis by Mizuho suggests that DoorDash is likely to surpass GOV expectations due to factors such as low penetration in the US food delivery market, gains in international market shares, and a shift toward high-average-order-value grocery items.
Mizuho also predicts that the company's take-rate, the percentage of the total order value that DoorDash retains, will be a significant profitability driver for the fiscal year 2025, propelled by growth in advertising monetization and increased efficiency in the delivery network.
Mizuho's projections indicate that the consensus estimates for DoorDash's incremental margins for fiscal years 2025 and 2026 might be understated, expecting a modest year-over-year increase. The firm's own forecasts are approximately 5% and nearly 10% ahead of the consensus, respectively. This outlook is further supported by the anticipated benefits from top-line growth and improvements in the take-rate.
The securities firm has also revised its forecast for DoorDash's earnings before interest, taxes, depreciation, and amortization (EBITDA) for fiscal year 2026, raising it by 7% to $3.7 billion. The firm's statement highlighted the positive dynamics of top-line growth and EBITDA upside, concluding that the risk/reward profile for DoorDash is constructive, which has led to the raised price target.
In other recent news, DoorDash Inc. has been the subject of several analyst upgrades following robust Q3 results. BofA Securities raised its price target to $210, citing the company's stable demand trends and expected growth catalysts such as international expansion.
Loop Capital also increased its price target to $200, recognizing DoorDash's excellence in execution. DA Davidson and Oppenheimer followed suit, revising their price targets to $150 and $180 respectively, on the back of strong Q3 performance and a promising partnership with Lyft (NASDAQ:LYFT).
The company reported a 19% increase in Gross Order Value (GOV) for the third quarter, with revenue growth outpacing GOV growth, mainly driven by advertising and efficient Dasher costs. DoorDash's international business is now gross profit positive, demonstrating improved contribution margins similar to those in the U.S.
In addition to strong earnings, DoorDash has made strategic moves to enhance its market share. The firm recently announced a partnership with Lyft to boost the value of its DashPass subscription service. Furthermore, DoorDash acquired Tazz by Wolt, marking a significant step in expanding its market share in Europe. These recent developments underscore DoorDash's commitment to growth and operational efficiency.
InvestingPro Insights
DoorDash's recent performance and future prospects align closely with Mizuho Securities' optimistic outlook. According to InvestingPro data, DoorDash's revenue growth remains strong, with a 24.56% increase over the last twelve months as of Q3 2024. This robust top-line growth supports Mizuho's expectation of surpassing Gross Order Value (GOV) expectations.
InvestingPro Tips highlight that analysts anticipate sales growth in the current year, further reinforcing Mizuho's positive stance. Additionally, the tip indicating that net income is expected to grow this year aligns with Mizuho's projections of improved profitability.
The company's financial health appears solid, with InvestingPro Tips noting that DoorDash holds more cash than debt on its balance sheet and that liquid assets exceed short-term obligations. This strong financial position could provide the company with the flexibility to invest in growth initiatives and improve its delivery network efficiency, as suggested in Mizuho's analysis.
It's worth noting that DoorDash's stock has shown a strong return over the last year, with a 88.94% price total return. This performance, combined with the fact that the stock is trading near its 52-week high, reflects the market's confidence in the company's growth trajectory.
For investors seeking a more comprehensive analysis, InvestingPro offers 17 additional tips for DoorDash, providing a deeper understanding of the company's financial position and market performance.
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