On Tuesday, BofA Securities adjusted its outlook on DoorDash Inc. (NASDAQ: NASDAQ:DASH), increasing the stock price target to $155 from the previous $139, while maintaining a "Buy" rating on the shares. The revision reflects the company's robust growth and margin profile compared to its peers.
The decision to raise the price target is rooted in DoorDash's performance metrics which are notably strong when compared to a comparison group that includes FANG stocks and Uber (NYSE:UBER). The comparison group is currently trading at 4.9 times their expected 2025 revenue, an increase from the previous 4.8 times, and shows an average EBITDA margin of 21% along with an average revenue growth of 14.5% for the years 2024 and 2025.
DoorDash, with an 18% EBITDA margin and a 17.5% average revenue growth for the same period, is positioned to outperform the comparison group. This has led BofA Securities to select a revenue multiple of 5.5 times for DoorDash, slightly above the peer group's average, to reflect the company's superior growth trajectory.
The new price target is based on an enterprise value (EV) of $66 billion, or a market capitalization of $69 billion including net cash. The calculation assumes a share count of 440 million, which has been adjusted down by 10 million to account for incremental buybacks. BofA Securities' analysis indicates that DoorDash's growth and margin outlook justifies a premium valuation relative to its peers.
InvestingPro Insights
As BofA Securities highlights DoorDash's promising growth and margin profile, recent data from InvestingPro supports this optimistic outlook. DoorDash's revenue growth has been impressive, with a 31.17% increase over the last twelve months as of Q4 2023, outpacing many in its sector. This is complemented by a strong return over the last year, with a price total return of 117.51%, signaling robust investor confidence.
InvestingPro Tips suggest that DoorDash holds more cash than debt on its balance sheet and is expected to see net income growth this year. These financial strengths demonstrate the company's solid footing and potential for sustained growth. Additionally, the company's liquid assets exceed its short-term obligations, providing flexibility and stability for future operations.
With a market capitalization adjusted to $55.03 billion and trading near its 52-week high, DoorDash's valuation reflects its high growth prospects. Investors interested in deeper analysis can find additional InvestingPro Tips to guide their investment decisions.
For those looking to take advantage of the comprehensive insights available on InvestingPro, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. Note that there are 13 additional InvestingPro Tips listed for DoorDash, which can provide further context to the company's financial health and market position.
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