On Wednesday, BofA Securities updated its outlook on DoorDash Inc. (NASDAQ: NASDAQ:DASH), increasing the price target to $210 from the previous $170 while maintaining a Buy rating. The firm's analysis indicates that DoorDash's fundamental outlook for the upcoming year is robust, driven by stable demand trends in the company's core U.S. restaurant business.
Additionally, improvements in unit economics and purchase frequency, along with new business verticals and international expansion, are expected to act as growth catalysts.
The analyst from BofA Securities highlighted that DoorDash is well-positioned for margin expansion despite ongoing investments. The company's continued market share gains and product innovation were also commended. There is an anticipation of potential upward revisions to EBITDA estimates, especially given the improving unit economics of DoorDash's international portfolio.
The revised price target of $210 is based on a 23x EV/EBITDA multiple of the fiscal year 2026 EBITDA. This valuation represents a premium compared to the average multiple of 13.1x within the company's competitive group.
The premium is justified by DoorDash's market leadership, potential for estimate beats, the possibility of being added to the S&P index, strong growth profile, a straightforward business narrative, and a management team led by the company's founders.
The report also compared DoorDash's performance with the broader market and its peers, noting that since being named a top pick on July 15, DoorDash's shares have increased by 67%, outperforming the S&P 500's 5% gain and the mixed performance of competitors such as Uber (NYSE:UBER), Lyft (NASDAQ:LYFT), and Caviar.
At the time of the analysis, DoorDash shares were trading at an EV/EBITDA multiple of 19.8x for the estimated 2026 EBITDA, which is below its two-year historical median of 25.6x, suggesting that the current valuation is reasonable and not excessive relative to the company's growth trajectory.
In other recent news, DoorDash has seen considerable growth and operational efficiency in its Q3 results. Loop Capital, DA Davidson, and Oppenheimer all have adjusted their price targets for the company, citing strong performance, international expansion, and the success of the grocery segment. Loop Capital maintains a Buy rating, while DA Davidson retains a Neutral stance, and Oppenheimer continues with an Outperform rating.
DoorDash's Q3 earnings exceeded projections, with the company reporting a 19% increase in Gross Order Value (GOV). The company's revenue growth has outpaced GOV growth, driven by advertising and efficient Dasher costs. Furthermore, DoorDash's international business is now gross profit positive, showing improved contribution margins similar to those in the U.S.
DoorDash also announced a partnership with Lyft to enhance the value proposition of its subscription service, DashPass. The collaboration will provide discounted Lyft rides and free upgrades to DashPass members. This development, along with DoorDash's acquisition of Tazz by Wolt to expand its market share in Europe, are part of the company's recent strategic moves.
The company's continued commitment to growth and operational efficiency is evident in these developments. However, DoorDash anticipates product enhancements to proceed at a slower pace than in previous years.
InvestingPro Insights
Recent data from InvestingPro reinforces BofA Securities' bullish stance on DoorDash (NASDAQ: DASH). The company's market cap stands at an impressive $73.18 billion, reflecting strong investor confidence. DoorDash's revenue growth remains robust, with a 24.56% increase over the last twelve months and a 25.05% quarterly growth in Q3 2024. This aligns with the analyst's positive outlook on the company's core business and expansion initiatives.
InvestingPro Tips highlight that DoorDash holds more cash than debt on its balance sheet, indicating financial stability. Additionally, analysts anticipate sales growth in the current year, supporting BofA's expectations for continued market share gains and product innovation.
The stock's recent performance has been particularly strong, with a 54.6% price return over the past six months and an 84% return over the last year. This outperformance aligns with BofA's observation of DoorDash's shares outpacing the S&P 500 since being named a top pick.
Investors should note that DoorDash is trading near its 52-week high, with its price at 98.89% of the 52-week high. While this suggests strong momentum, it also indicates that the stock may be in overbought territory, as suggested by another InvestingPro Tip.
For those seeking a more comprehensive analysis, InvestingPro offers 17 additional tips for DoorDash, providing a deeper understanding of the company's financial health and market position.
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