On Friday, BMO Capital Markets adjusted its outlook on DoorDash Inc. (NASDAQ: NASDAQ:DASH), increasing the price target to $140 from the previous $127, while maintaining an Outperform rating on the shares. The revision follows DoorDash's reported performance and future expectations.
The firm's decision comes in light of DoorDash's second-quarter results, which surpassed expectations in gross order volume (GOV) and EBITDA growth. This performance is notable given the current economic backdrop, where the U.S. consumer spending is showing signs of weakening.
BMO Capital Markets highlights several factors contributing to its positive stance on DoorDash. These include an improvement in unit economics anticipated in the second half of 2024, as well as an expansion in merchant selection that has led to record-high customer engagement levels.
The analyst's updated forecast is based on a combination of sustained growth in DoorDash's core restaurant business and the increasing adoption of new verticals. These elements are expected to drive a significant increase in order frequency, with projections indicating an average of 5.3 times orders per month in the third quarter of 2024, which is expected to rise to 5.4 times by the end of the year.
DoorDash's stock price target adjustment reflects confidence in the company's continued growth trajectory and its ability to adapt and thrive even in a challenging economic environment.
In other recent news, DoorDash Inc. has been making headlines following robust second-quarter results that exceeded expectations in key financial metrics.
The company's gross order value and revenue surpassed Wall Street estimates by roughly 3%, and its EBITDA was about 20% higher than projected by Piper Sandler. In response, several firms, including Piper Sandler, Evercore ISI, and Truist Securities, have revised their price targets for DoorDash.
Evercore ISI increased its price target for DoorDash to $155, citing the company's potential for near-premium revenue growth and substantial Total Addressable Market. The firm also projected a $2 billion free cash flow for the fiscal year 2024. Truist Securities maintained a Buy rating and a steady price target of $145, anticipating robust growth in orders and average order value.
Meanwhile, Deutsche Bank maintained a Buy rating and a $155 price target, expecting a favorable reaction to the upcoming second-quarter earnings report. The bank forecasts improvements in unit economics and diminishing mix headwinds, which are expected to enhance reported Gross Margins.
In addition to financial growth, around 20% of DoorDash users are now ordering groceries through the platform, and the company's order frequency reached a record level.
InvestingPro Insights
As BMO Capital Markets updates its outlook on DoorDash Inc. (NASDAQ: DASH), it's important to consider additional insights that could impact investors' perspectives. According to InvestingPro data, DoorDash holds a market capitalization of approximately $47.69 billion. Despite a challenging past year, the company has shown a robust revenue growth of 27.24% in the last twelve months as of Q1 2024. This aligns with the analyst's observation of DoorDash's strong performance and supports the potential for sustained growth.
InvestingPro Tips reveal that DoorDash's balance sheet is in a healthy state, with more cash than debt, and liquid assets exceeding short-term obligations. These factors suggest a strong financial position that could help the company navigate economic uncertainties. Additionally, analysts predict that DoorDash will be profitable this year, which could be a turning point for the company that has not been profitable over the last twelve months. It's also worth noting that while the stock is known for its volatility, with price movements that can be quite unpredictable, it's currently trading at a high revenue valuation multiple, indicating investor optimism about its future growth prospects.
For those seeking a deeper analysis, InvestingPro offers even more tips, with a total of 9 listed on their platform, providing a comprehensive understanding of DoorDash's financial health and market position. This data, combined with the insights from BMO Capital Markets, paints a picture of a company poised for potential growth in the face of economic headwinds.
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