On Thursday, Benchmark adjusted its outlook on DoorDash Inc. (NASDAQ:DASH), lowering the price target to $150 from the previous $165, while still maintaining a Buy rating on the stock. The revision follows a sell-off in response to the company's second-quarter guidance, which raised questions about near-term growth and additional investment needs.
The company's first-quarter Gross Order Value (GOV) remained solid, and the guidance for the second-quarter GOV was considered reasonable. However, the anticipated adjusted EBITDA for the second quarter suggests a modest flat sequential growth at the midpoint of the $325 million to $425 million range. This projection presents a wider range than the typical guidance range DoorDash has issued in past quarters, which averaged around $55 million.
DoorDash management has also withdrawn the annual guidance that was originally provided in its fourth-quarter report. While this may have been planned, the lack of communication during the fourth-quarter call has been noted. Furthermore, a slight deceleration in U.S. restaurant growth was observed in the first quarter compared to the fourth quarter, which was adjusted for an additional day due to the leap year.
The analyst believes that DoorDash may be entering a year where it confronts the 'law of large numbers' in terms of restaurant orders. The company is also dealing with higher regulatory costs and research and development expenses in the first half of the year. Despite these challenges, the analyst expects management to strategically invest to ease the transition period.
In conclusion, while 2024 may not replicate the previous years of exceeding expectations and raising forecasts, a significant slowdown in growth is not anticipated. The maintained Buy rating reflects continued confidence in the long-term fundamentals of DoorDash, despite the adjustment to the price target based on a discounted cash flow (DCF) analysis.
InvestingPro Insights
Adding to the analysis, recent data from InvestingPro shows that DoorDash Inc. (NASDAQ:DASH) holds a market capitalization of $51.49 billion and has experienced a notable revenue growth of 31.17% over the last twelve months as of Q4 2023. This growth is a testament to the company's expanding market presence and could be a reassuring sign for investors concerned about near-term growth prospects.
InvestingPro Tips highlight that DoorDash is expected to see net income growth this year, which may align with the analyst's view on the company's long-term fundamentals. Moreover, the company's strong return over the last three months, with a price total return of 16.4%, and an impressive one-year price total return of 106.85%, underscores its recent robust performance in the market.
However, the company does not come without its risks, as it is trading at a high revenue valuation multiple and a Price / Book multiple of 7.57, indicating that the stock might be priced optimistically in relation to its book value and revenue. Additionally, DoorDash has been flagged for its volatility, with stock price movements that could affect short-term investment decisions.
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