Investing.com -- BTIG upgraded DoorDash (NASDAQ:DASH) to a Buy from Neutral with a price target of $155 in a note Thursday, citing underappreciated tailwinds and strong near-term growth prospects.
"DASH has been on our radar for a while given a positive category bias, consistently strong execution and steady upward pressure on estimates," said BTIG.
The analysts highlighted several key factors driving the upgrade, starting with positive checks indicating sustained momentum in the company's growth.
Additionally, DoorDash is expected to reach important milestones, including positive EBIT and net income in the second half of 2024.
The analysts believe DoorDash is well-positioned in the rapidly growing food delivery market, which has a total addressable market (TAM) of approximately $1.5 trillion but remains underpenetrated, with the three largest platforms holding less than 15% market share.
"TAM is big (~$1.5T+) and penetration low (three largest platforms <15%), with DASH positioned to capitalize on secular trends," they write, noting the favorable competitive landscape allowing the company to invest in new verticals while expanding margins.
BTIG raised its estimates for DoorDash, forecasting stable growth in gross order volume (GOV) and an increase in ad revenue.
The firm predicts GOV growth of 19% for Q3, above the company's guidance range of 16-18%. DoorDash is expected to achieve a compound annual growth rate (CAGR) of 15% in GOV and 18% in revenue through 2026, driven by persistent user frequency tailwinds and a tripling of ad revenue.
The analysts also anticipate DoorDash will reach a mid-20s EBITDA margin by 2026, stockpiling nearly $8 billion in cash by that time.
Addressing concerns about consumer weakness impacting delivery, BTIG stated that their tracking shows stable growth in the category, with low-single-digit user growth and mid-single-digit order frequency growth.
In addition, the analysts believe DoorDash's geographic diversity will mitigate potential regulatory challenges related to driver status and pay.