Why 6 DoorDash Analysts Are Raising Price Targets After Q2 Earnings

Analysts share their reactions and new price targets on shares of DoorDash Inc DASH, which reported second-quarter earnings Thursday after market close.

The DoorDash Analysts: Barclays analyst Ross Sandler had an Equal Weight rating and raised the price target from $160 to $183.

JMP Securities analyst Ronald V. Josey had a Market Outperform rating and raised the price target from $195 to $210.

Wells Fargo analyst Brian Fitzgerald had an Overweight rating and raised the price target from $215 to $235.

RBC Capital analyst Brad Erickson had an Outperform rating and raised the price target from $175 to $210.

Mizuho Securities analyst James Lee had a Neutral rating and raised the price target from $155 to $175.

Needham analyst Bernie McTernan had a Buy rating and raised the price target from $195 to $230.

The Analyst Takeaways: DoorDash gained three percentage points in market share for the U.S. food delivery share, Josey said. The analyst notes a highly engaged customer based and also highlighted frequency hitting an all-time high in the quarter.

“DashPass subscribers grew more than 2x as fast as non-DashPass MAUs year-over-year,” Josey said.

DoorDash management said its order frequency has not reached its peak yet, Fitzgerald added.

A focus on gross profit dollars and reinvestment in growth initiatives was called out by Erickson in the updated note.

“On top of beating gross order volume, revenue and EBITDA and raising its FY guide, specific encouraging demand highlights includes 300 bps of U.S. shares gains year-over-year,” Erickson said.

The analyst noted company management mentioned progress in Canada and Australia and other international launches coming.

“Volume growth was the highlight of 2Q earnings to us, highlighting consumer delivery habits are still sticky late into the pandemic,” McTernan said. The analyst was surprised by the upside in volume in the late stages of the pandemic.

Non-Food Delivery Growth: Sandler highlighted the growth of DoorDash in non-restaurant areas like grocery, convenience, pets and alcohol. This segment is helping drive frequency, retention and efficiency for the company with frequency hitting record highs in the quarter.

DoorDash’s non-restaurant orders could have been placed by 10% of the company’s users in the second quarter, compared to 7% of orders in the first quarter, Josey said.

The analyst also noted the addition of more than 5,000 convenience stores in the second quarter including Walgreens Boots Alliance Inc WBA, Rite Aid Corporation RAD, Albertsons Companies Inc ACI, PetSmart and Bed Bath & Beyond Inc. BBBY locations.

“Over 30% of DASH’s business came from orders outside restaurants in Q2, early data suggest that multi-category customers increase both their retention and engagement rates,” Fitzgerald said.

Related Link: DoorDash IPO: 5 Key Takeaways Investors Need To Know

What’s Next: International growth, investments in new categories and a healthy supply of Dashers are highlighted by Josey.

“DASH deserves a premium to the peer set,” Sandler said.

“We expect DASH shares to continue to grind higher as its U.S. market share and momentum continue to resonate,” Fitzgerald said. “If DASH can replicate the operational prowess it has demonstrated in the U.S. as a fast follower in international markets, we think shares have significantly more upside in the coming years.”

Additional grocery delivery is expected to roll out in the second half of the year “providing opportunities to become a second logistics source for some key accounts,” highlights Fitzgerald.

DoorDash has some regulatory headwinds in large cities such as San Francisco and New York City but Lee sees these being less than feared. Management sees momentum carrying into the third quarter, the analyst notes.

“Given investments in new categories and international markets we believe the level of incremental investment represents the greatest risk to our forecast,” McTernan said.

DASH Price Action: DoorDash shares are up 1.87% to $191.73 on Friday.

Photo: Courtesy of DoorDash