Tuesday, Needham & Company maintained a Buy rating and a $133.00 price target for DoorDash Inc. (NASDAQ: NASDAQ:DASH), despite recent adjustments to its fee structure in New York City. The changes were implemented in response to the city's increased minimum wage for delivery workers and a rise in service fee minimums that started in mid-January.
DoorDash has introduced a NYC Regulatory Response Fee and has reportedly raised fees for NYC restaurants while also shifting focus away from tipping. These moves come as the company faces a $40 million increase in quarterly costs due to the minimum wage hike that took effect in December.
"While there are a lot of assumptions in our analysis, our math suggests DASH can offset the minimum wage increase without an increase in consumer spending driven by tipping effectively moving to a service fee," said Needham analysts.
The firm's confidence in DoorDash is further underscored by the company's placement on the Needham Conviction List. Needham projects that DoorDash will surpass consensus estimates for the years 2024 and 2025. This optimism is based on the belief that concerns over incremental margins, including the effects of the NYC minimum wage increase and additional investments in Total Addressable Market (TAM), are exaggerated.
According to the firm, DoorDash is well-positioned to manage the impact of higher labor costs while continuing to grow and potentially outperform market expectations in the coming years.
InvestingPro Insights
In light of Needham & Company's maintained Buy rating for DoorDash Inc. (NASDAQ: DASH), InvestingPro offers additional insights that may interest investors. With a market capitalization of $43.84 billion and a notable revenue growth of 34.38% over the last twelve months as of Q3 2023, DoorDash is demonstrating a strong capacity for increasing its top-line earnings.
InvestingPro Tips reveal that DoorDash holds more cash than debt on its balance sheet, providing a level of financial stability and flexibility. Additionally, despite recent volatility in the stock price, DoorDash has shown a high return over the last year, with an impressive 81.17% price total return. This aligns with Needham's positive outlook on the company's ability to manage increased labor costs in NYC and continue its growth trajectory.
However, it's important to note that DoorDash is trading at a high revenue valuation multiple with a Price / Book ratio of 6.67 as of Q3 2023, indicating that the stock might be priced optimistically in terms of its book value. Moreover, the company has not been profitable over the last twelve months, reflected in a negative P/E ratio of -41.09. This could be a point of consideration for investors looking at the company's current earnings in relation to its share price.
For those seeking a deeper dive into DoorDash's financial health and future prospects, InvestingPro offers an array of additional tips. Currently, there are 15 more InvestingPro Tips available, which can provide a comprehensive understanding of the company's potential. Utilize coupon code SFY24 to get an additional 10% off a 2-year InvestingPro+ subscription, or SFY241 to get an additional 10% off a 1-year InvestingPro+ subscription, to access these insights and make informed investment decisions.
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