DoorDash stock price analysis and the $51 billion question

The DoorDash (DASH) stock price has staged a strong recovery this month after the company published strong financial results and upped its forward guidance. It jumped to a high of $126.36, its highest point since April 25th of this year. 

DoorDash is doing well

DoorDash is one of the biggest technology companies in the United States. It is a giant in the food and grocery delivery business, an industry that has seen exponential growth in the past few years. 

This industry boomed during the Covid-19 pandemic as most Americans spent most of their time at home. At the time, DoorDash’s revenue jumped from over $880 million in 2019 to over $2.86 billion in 2021 and $4.8 billion in 2022. 

Analysts believe that the food delivery industry has more room to grow as the number of people embracing the technology rise. 

The challenge, however, is that the sector has gotten highly competitive in the past few years. Uber has become one of the biggest players in the industry as the company has leveraged its network to recruit drivers around the world. It also competes with the likes of PostMates, GrubHub, Deliveroo, and Delivery Hero. 

Despite these challenges, DoorDash is still seeing strong revenue growth. In the last quarter, the company’s number of orders increased as the company continued taking market share. Total orders rose by 19% to 635 million while its gross volume rose to over $19.7 billion. 

Financially, DoorDash made over $2.6 billion in the second quarter, a big increase from the $2.1 billion it made in the same period in 2023. Its adjusted EBITDA also jumped to over $430 million.

The other key reason for this growth is its international business, which was made possible by its acquisition of Wolt in 2021. In the past few years, Wolt has become a highly popular company in many European countries like Finland, Denmark, Germany, and Poland. In Q2 alone, Wolt added over 500 cities and the trajectory is continuing.

The $51 billion question

Doordash is doing well and analysts believe that the trend will continue in the coming years. Precisely, they believe that its annual revenue will soar to over $10 billion this year followed by $12 billion in the following year. 

However, there are some potential risks to have in mind. First, despite the strong growth trajectory, there are signs that the company’s growth is starting to fade. Its revenue growth was 33% in Q2 of 2023 followed by 27%, 27%, 23%, and 23% in the following quarters. 

Therefore, if the trend continues, the company could move to single-digit growth in the next few years. Such a move would remove the premium in its valuation.

The other concern is that the company has a market cap of over $51 billion, which is a lot of money. In other words, DoorDash is now more valuable than General Motors, a company that made over $157 billion in revenue in 2023 and a net profit of over $48 billion. GM has a market cap of over $48 billion. 

Comparing DoorDash and General Motors is an apples-to-oranges comparison. The closest comparison would be a company like Uber, which provides mobility and food delivery solutions. 

DoorDash’s annual revenue is expected to be $10.5 billion this year while Uber is expected to make $43 billion. The two have a market cap of over $51 billion and $144 billion, respectively while Uber is already profitable. 

Therefore, by dividing the two, we see that Uber has a multiple of 3.34 while DoorDash has 4.85, meaning that it is overvalued. One way to justify this valuation would be to look at their growth rates. If DoorDash is growing faster, it means that it can justified. 

Uber’s annual growth for this year is expected to be 24.40% while DoorDash’s growth rate will be 22%. This, together with the fact that DoorDash is still losing money, means that it is hard to justify the valuation. 

DoorDash is also more valued than other companies in the industry like Just Eat Takeaway and Delivery Hero. A likely reason for this is that investors expect its revenue growth to continue because of its global expansion. 

DoorDash stock price analysis

The daily chart shows that the DASH share price has staged a strong comeback in the past few days. As it rose, the 50-day and 100-day Exponential Moving Averages (EMA) have formed a bullish crossover pattern. Most notably, the stock has formed a bullish pennant pattern, which is positive sign.

Therefore, the stock will likely continue soaring as buyers target the key resistance point at $143, the year-to-date high, which is about 15% above the current level. This target is a bit higher than the average analyst target of $141.44. On the flip side, a drop below the key support at $120 will point to more downside.