On Thursday, Deutsche Bank (ETR:DBKGn) reiterated its positive stance on DoorDash Inc. (NASDAQ: NASDAQ:DASH) shares, maintaining a Buy rating and a price target of $155.00. The firm's outlook for the food delivery company is optimistic, anticipating a favorable reaction to the upcoming second-quarter earnings report in August.
This forecast comes despite the stock's relative underperformance since the first-quarter earnings release, attributed to slowing third-party data and concerns about demand and pricing pressures from the restaurant industry.
The bank expects a modest second-quarter beat compared to Wall Street's expectations and a third-quarter Gross Order Value (GOV) outlook that suggests only a slight slowdown. These factors are projected to boost investor sentiment for DoorDash shares.
Additionally, Deutsche Bank forecasts the third-quarter Adjusted EBITDA guidance will kick off a positive revision cycle for the company's earnings before interest, taxes, depreciation, and amortization.
The bank's analysis indicates that the market may be underestimating DoorDash's margin potential, as improvements in unit economics and diminishing mix headwinds in international markets and new business verticals are expected to enhance reported Gross Margins. Furthermore, DoorDash is anticipated to counter regulatory cost challenges by year's end through efficiency gains and increased fees.
Deutsche Bank's $155 price target is based on a sum-of-the-parts (SOTP) valuation model, applying an approximately 18x Adjusted EBITDA multiple to DoorDash's U.S. restaurant operations and roughly a 2.8x revenue multiple to its growth businesses.
The firm believes that nearly $2 billion in FY24 EBITDA could become feasible after the second-quarter earnings, positioning DoorDash's risk/reward profile as one of the most attractive within its coverage area.
In other recent news, DoorDash has been the focus of several developments. Wolfe Research initiated coverage on DoorDash with an Outperform rating, citing strong demand trends, robust unit economics, and promising growth catalysts such as expansion into new verticals and international markets.
However, BMO Capital reduced its price target on DoorDash due to concerns about the company's EBITDA margins for Q2 2024, while still maintaining an Outperform rating.
In terms of mergers, DoorDash had discussions with UK-based Deliveroo (OTC:DROOF) regarding a potential acquisition, but talks have ceased due to disagreements over valuation. Meanwhile, Dada Nexus Limited, a significant player in China's on-demand retail and delivery market, reported a revenue shortfall for Q1 2024, causing investor concern.
Furthermore, the Massachusetts Supreme Judicial Court is set to hear arguments that could redefine the employment status of app-based drivers for companies such as Uber (NYSE:UBER), Lyft (NASDAQ:LYFT), and DoorDash. These are all recent developments that have implications for DoorDash and its investors.
InvestingPro Insights
As DoorDash (NASDAQ: DASH) gears up for its second-quarter earnings report, it's essential to consider some key financial metrics and expert analysis that could offer a deeper understanding of the company's position. According to InvestingPro data, DoorDash holds a market cap of $42.18 billion, with a significant revenue growth of 27.24% over the last twelve months as of Q1 2024. This growth narrative is further underscored by a gross profit margin of 48.09% in the same period, highlighting the company's ability to retain a substantial portion of its revenue after accounting for the cost of goods sold.
InvestingPro Tips suggest that DoorDash is trading at a high Price / Book multiple of 6.03, indicating that investors are willing to pay a premium for the company's net assets. Despite not being profitable over the last twelve months, analysts predict that the company will turn a profit this year, which could be a crucial factor in justifying the current valuation multiples. Additionally, the fact that DoorDash holds more cash than debt on its balance sheet and has liquid assets that exceed short-term obligations provides a cushion for operational flexibility and potential growth investments.
For readers who are considering a deeper dive into DoorDash's financial health and future prospects, InvestingPro offers a wealth of additional tips, including insights on stock price volatility and valuation multiples. To explore these further, use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription. With 9 additional tips available on InvestingPro, investors can make more informed decisions armed with a comprehensive analysis of DoorDash's financial landscape.
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