DoorDash (DASH) shares doubled during 2023, which went a long way to putting the pandemic darling on the comeback trail. The good news for DASH stock now is that Americans appear hooked on ordering burgers from the comfort of their couch — and they've discovered the company offers more than just takeout.
↑X What Are Small-Cap Stocks? See All Videos
San Francisco-based DoorDash holds a wide lead as the largest food-delivery company in the U.S. by market share. Sales surged at the start of the pandemic, and DoorDash has proved its staying power since then. The company tallied $6.3 billion in sales through the first nine months of 2023, up 33% from the year-ago period.
This came despite concerns that inflation would force customers to cut back on ordering.
"The product improvements that we've made in the years leading up to these moments have certainly helped us build a product that endures," DoorDash Chief Executive Tony Xu said on the company's November earnings call.
The company is pushing further beyond its core business of fulfilling food orders from U.S. restaurants. Now it delivers groceries, electronics and convenience items. There are caveats, however.
The categories where DoorDash is venturing are highly competitive, so Wall Street will be watching closely. Plus, DASH stock still trades well below a peak of 257.25 reached in November 2021, despite its recent momentum.
And the company has yet to turn a profit since going public three years ago.
Catching Wall Street By Surprise
That's why DoorDash's surge last year caught some Wall Street stock pickers by surprise. For much of 2023, more analysts had either a neutral or sell recommendation for DASH stock than a buy rating.
DoorDash was coming off a turbulent 2022. The stock lost 67% of its value that year amid concerns over losses, and the company laid off about 6% of its staff in November of that year. For 2023, it seemed a reasonable bet that Americans would cut back on ordering in, as a response to inflation and broader economic concerns.
But DoorDash answered doubts with its earnings results last year.
In its most recent earnings report issued Nov. 1, DoorDash said third-quarter sales for 2023 grew 27% year over year to $2.2 billion, beating analyst views. Further, the company's adjusted net loss narrowed to $75 million, compared with $296 million for the same period in 2022. Wall Street also noted that total orders through DoorDash jumped 24% year over year, to 543 million.
Shares soared 15% the next day. DASH stock climbed steadily from there, and closed 30% higher by the end of 2023.
"Bears may point to an eventually softening consumer, but this continues to not play out," RBC analyst Brad Erickson wrote to clients following DoorDash's earnings report.
The gains last year led to DoorDash's inclusion in the Nasdaq 100 index in December. Among those displaced in the reshuffling was Zoom Video Communications (ZM), a fellow pandemic darling having a rougher time building off its 2020 revenue surge.
DASH Stock: Selling Convenience
Founded in 2013, DoorDash was originally known as Palo Alto Delivery. The firm now operates in more than two dozen countries and delivers food and other products not just from restaurants but also supermarkets, retailers and convenience stores.
DoorDash got a massive boost in 2020, when pandemic-fueled sales surged 230% to $2.9 billion, thanks to diners staying home for much of the year. DoorDash rode that wave to a December 2020 initial public offering.
DASH stock rocketed in a dizzying first day of trading and closed more than 80% above its IPO price. From there, shares climbed another 40% before peaking in November 2021.
As of December, DoorDash captured two-thirds of all U.S. food delivery sales, according to estimates by Bloomberg Second Measure. That was well ahead of the 25% share held by rival Uber (UBER) and its Postmates affiliate. Grubhub, which is owned by U.K.-listed Just Eat Takeaway, came in third with 8%.
Evercore ISI analyst Mark Mahaney, a DASH stock bull, wrote in a recent client note that a "macro trend of convenience" has helped DoorDash maintain steady sales growth despite concerns about overall consumer spending.
In other words, DoorDash's customers increasingly view it as a utility to make life easier, rather than a luxury.
That goes for dinner plans, naturally, but it also apparently applies to hangover relief. DoorDash said in a recent blog post that orders of ibuprofen on the app typically spike 400% the day after major U.S. holidays. The drugstore order was most often paired with a cheesesteak, the company says.
DoorDash's Expansion Plans
DoorDash plans to keep expanding. At the start of the year, Xu told the Financial Times that DoorDash is focusing on ventures outside the U.S. and further beyond the restaurant market.
That includes partnerships with retailers. As of December, DoorDash customers can order televisions and wireless speakers from Best Buy (BBY). In all, there are more than 100,000 non-restaurants among the 500,000 or so merchants whose products are available through DoorDash, the company says.
Meanwhile, DoorDash has expanded to new regions via acquisitions. That includes a $3.5 billion purchase of Finnish delivery startup Wolt, expanding DoorDash's European operations.
Beyond that, the company also hopes to ramp up high-margin advertising sales within its app, similar to Uber and grocery rival Instacart (CART).
And there is an ongoing push to add subscribers to its DashPass product, which offers free delivery from some merchants and other benefits for $9.99 per month. There were 15 million DashPass users as of December 2022, the last time the company disclosed the figure.
How Analysts View DASH Stock
DoorDash shares gained following a Jan. 8 upgrade by analysts at Jefferies to buy, from hold. Analyst John Colantuoni expects DoorDash can double its adjusted earnings over the next two years through a growing advertising business and improved international operations and newer lines of business, such as groceries.
Evercore's Mahaney, meanwhile, rates DoorDash buy with a price target of 120.
"We believe DASH is continuing to face consistently robust demand trends, is executing well on its international and vertical expansion strategy, and faces a significant new profit opportunity as an advertising platform," Mahaney wrote in a Jan. 11 note to clients.
Of the 38 analysts following DoorDash stock, 47% have a buy rating, according to FactSet. That is up from 35% in June 2023.
Wedbush analyst Scott Devitt offered a neutral take in a note last month.
"We believe there is significant execution risk ahead as growth is pursued across highly competitive grocery/retail categories," Devitt wrote. He added that DoorDash will also face tougher competition in international markets.
DoorDash reports fourth-quarter earnings Feb. 15. For fiscal 2023, analysts expect DoorDash to post a loss of $1.19 per share, FactSet says. That compares with a $3.68 loss last year. Further, analysts see DoorDash's annual sales jumping 24% to $66.2 billion.
Regulatory Challenges?
Another factor to watch is regulation. The company's couriers work as independent contractors. DoorDash — along with Uber, Lyft (LYFT) and others — has fought several legal and political battles in support of that view.
But both New York City and Seattle recently adopted wage laws for delivery workers that DoorDash opposed. And the Labor Department recently finalized a rule setting stricter standards when classifying workers as contractors.
DoorDash recently posted a statement online that it does not anticipate the rule will materially affect its business.
Investors appear unfazed thus far. While DASH stock fell 6% on the day the Biden administration published a draft of the rules in October 2022, DoorDash traded higher the day the final rule was published, earlier this month.
DASH Stock: Technical Analysis
As of Jan. 16, DASH stock has an IBD Composite Rating of 93 out of a best-possible 99, according to IBD Stock Checkup.The score combines five separate proprietary ratings into one rating — with the best growth stocks scoring above 90.
Further, DASH has an IBD Relative Strength Rating of 96. The Relative Strength Rating shows how a stock's price performance stacks up against the market over the last 52 weeks. The best growth stocks typically have RS Ratings of at least 80.
Also, DASH stock is on theIBD 50 premier growth-stock list. DoorDash shares are also on IBD's Tech Leaders list.
Shares currently are in a profit-taking zone after breaking out from a double-bottom pattern in November.
YOU MIGHT ALSO LIKE:
Why Amazon, Meta And Uber Are This Analyst's 'Top Ideas' For 2024
IBD Digital: Unlock IBD's Premium Stock Lists, Tools And Analysis Today
Learn How To Time The Market With IBD's ETF Market Strategy
IBD Live: A New Tool For Daily Stock Market Analysis
Want To Get Quick Profits And Avoid Big Losses? Try SwingTrader
