Down 65% Last Year, Is DoorDash Stock Attractive?

DASH: DoorDash logo
DASH
DoorDash

Food delivery player DoorDash stock (NYSE: DASH) had a very challenging 2022, declining by over 65% over the year. There have been many negative factors impacting DoorDash. Firstly, investors have pivoted away from pandemic favorites and highly valued tech stocks amid rising interest rates. High inflation and a tight labor market have also proven dampeners for  DoorDash. That being said, the food and grocery delivery story remains largely intact as a theme, despite the easing of Covid-19 and a recovery of brick-and-mortar retail. DoorDash’s growth has also been reasonably strong. Over Q3 2022, DoorDash grew marketplace gross order value by 21% year-over-year to $12.6 billion, excluding the results of the recently acquired Finnish delivery service Wolt. Total revenues also grew by 33% year-over-year during the quarter, coming in ahead of Street estimates. The company’s Dashpass service, which has higher customer loyalty and order rates, also grew sequentially to all-time highs.

We have reduced our price estimate for DASH stock to about $60 per share, from a previous estimate of $100 per share, due to a couple of factors. Firstly, there are concerns that the U.S. could be headed into a recession and this could impact DoorDash given that delivery demand is largely levered toward discretionary spending. Moreover, profitability also remains elusive for the company, despite its rising delivery volumes and revenues. Adjusted gross margins have trended steadily lower falling from about 56% roughly to 47% in Q3 2022. This could mean that DoorDash will take some time to turn profitable. That said, we remain positive on the stock, with our price estimate standing at about 25% ahead of the current market price. DoorDash trades at under 3x projected 2022 revenues, which is well below the 16x forward revenue multiples the stock traded at in 2021. DoorDash is looking to move into delivering more lucrative products such as alcohol and non-perishable goods, while also expanding its international footprint. See our analysis DoorDash Valuation: Expensive Or Cheap? for more details on DoorDash’s valuation. See our dashboard on DoorDash Revenue for an overview of DoorDash’s business model and how its revenues are likely to trend.

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 Returns Jan 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 DASH Return -2% -2% -66%
 S&P 500 Return 2% 2% 75%
 Trefis Multi-Strategy Portfolio 5% 5% 229%
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[1] Month-to-date and year-to-date as of 1/11/2023
[2] Cumulative total returns since the end of 2016

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