3 Analysts Debate DoorDash's Stock As IPO Quiet Period Ends

3 Analysts Debate DoorDash's Stock As IPO Quiet Period Ends

Photo courtesy of DoorDash

DoorDash Inc DASH evolved from its 2013 roots to become the largest third-party restaurant delivery platform in the U.S. with 390,000 merchants, 1 million couriers, and 18 million customers. The company went public in late 2020 and a handful of Wall Street analysts released their first thoughts on the stock.

The DoorDash Analysts: BofA Securities analyst Michael McGovern initiated coverage of DoorDash with a Neutral rating and $157 price target.

Goldman Sachs analyst Heath Terry initiated coverage of DoorDash with a Neutral rating and $135 price target.

Needham analyst Brad Erickson initiated coverage of DoorDash with a Buy rating and $200 price target.

The BofA Thesis: The COVID-19 pandemic forced millions of new consumers to eat from home, but the food delivery space remains in its very early stages, McGovern wrote in the initiation note. Third-party delivery apps combined for $42 billion in bookings in 2020, representing just 7% of the total $590-billion U.S. restaurant spend, the analyst said. 

DoorDash's market share is estimated at around 53% and the company's share growth accelerated throughout 2020.

The company's dominant position in a long-term growth category will translate to scale advantage, while its leadership status in suburbs will also generate superior unit economics, he said. 

Yet DoorDash's pace of growth in 2021 could slow versus 2020, and the company faces tougher comps compared to its peers, McGovern said. 

Dash's implied enterprise value of $54 billion translates to 12 times revenue, and 22 times gross profit versus the comp set at four times revenue and nine times gross profit, the analyst said.

A premium multiple is justified given the company's superior scale and ability to gain share, but it is difficult to justify incremental upside moving forward, according to BofA.

The Goldman Sachs Thesis: DoorDash developed a strong connection with consumers during the pandemic, and this will create a "stickiness" to its platform, Terry wrote in the initiation note.

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