Up More Than 35% in the Past 3 Months, Will DoorDash Continue to Climb?

Shares of logistic platform provider DoorDash, Inc. (DASH) soared 85% in price on the company’s stock market debut on December 9, 2020. Moreover, the stock of the San Francisco concern has gained 38.3% over the past three months to close yesterday’s trading session at $191.63 due to investor optimism surrounding the company’s market expansion and strategic developments. 

DASH announced its official launch in Japan on June 9, 2021, and announced its partnership with Beyond Meat, Inc. (BYND) later that month. However, the stock has lost 4.2% in price over the past six months and is currently trading 25.2% below its $256.09 all-time high, which it hit on January 27.

DASH’s wider-than-expected loss in the second quarter has been worrying investors. Also, the company anticipates a seasonal decline in new consumer acquisition and order rates in the third quarter. In addition, it continues to face intense competition from other players in the industry, such as Uber Technologies, Inc.’s (UBER) Uber Eats, and from retail giants such as Amazon.com, Inc. (AMZN) and Walmart Inc. (WMT) that rely on their employees for delivery services. So, DASH’s near-term prospects look bleak.

Here’s what we think could influence DASH’s performance in the upcoming months:

Pandemic-Led Boost May Decline

The demand for DASH’s services soared last year as people were compelled to spend most of the time at home and rely heavily on home delivery services. And even though the rapid spread of the COVID-19 Delta variant could benefit DASH in the near term, the demand for its services may not regain its 2020 levels. According to a CDC study, vaccination offers higher protection, so people may not depend on delivery services as much. According to the CDC, 72.3% of U.S. adults have received at least one dose of  vaccine.

So, DASH’s growth prospects look bleak. According to “While we observed encouraging trends in the first half of 2021, we caution investors that significant uncertainty remains, and consumer behavior could deviate from the expectations included in our guidance.”

Lack of Profitability

DASH’s revenue increased 83.1% year-over-year to $1.24 billion for the second quarter, ended June 30, 2021. The company’s total orders for the quarter increased 69% year-over-year to 345 million. However, its loss from operations came in at $99 million, versus $27 million in  operating income in the year-ago period. In addition, its net loss in the quarter was $102 million, compared to $23 million in income in the prior-year quarter.

Moreover, DASH’s trailing-12-month net income margin is negative, versus the 5.80% industry average. Its trailing-12-month ROCE, ROTC, and ROTA are also negative compared to the  15.83%, 6.88%, and 5.30% respective industry averages.

Stretched Valuation

In terms of forward non-GAAP P/E, DASH’s 632.12x is 4,151% higher than the 14.87x industry average. Likewise, the stock’s 7.18x forward non-GAAP PEG is 583.8% higher than the 1.05x industry average. Its forward EV/S and P/S of 12.56x and 13.49x, respectively, are higher than the  1.50x and 1.24x industry averages.

POWR Ratings Reflect Bleak Prospects

DASH has an overall rating of D which equates to Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree. 

Our proprietary rating system also evaluates each stock based on eight distinct categories. DASH has a D grade for Value, which is in sync with its higher-than-industry valuation ratios. It has a D grade for Stability also.

The stock has a D grade for Growth and Sentiment, which is consistent with analysts’ expectations that its EPS will remain negative in its fiscal years 2021 and 2022.

In addition to the POWR Rating grades we’ve just highlighted, we’ve also rated DASH for Momentum and Quality. Get all the DASH ratings here.

DASH is ranked #38 of 42 stocks in the Internet – Services industry.

Bottom Line

DASH is one of the largest delivery platform operators connecting more than 450,000 merchants, 20 million customers, and 2 million Dashers in the U.S., Canada, Australia, and Japan. However, the company faces intense competition from top players, and its near-term growth prospects look bleak. So, we think the stock is best avoided now.

How Does DoorDash (DASH) Stack Up Against its Peers?

DASH has an overall POWR Rating of D. Therefore, one might want to consider investing in other  Internet - Services stocks with a B (Buy) rating, such as Cimpress plc (CMPR) Criteo S.A. (CRTO), and Shutterstock, Inc. (SSTK).

DASH shares fell $8.38 (-4.37%) in premarket trading Thursday. Year-to-date, DASH has gained 28.25%, versus a 17.19% rise in the benchmark S&P 500 index during the same period.

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.

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