Why Are DoorDash Shares Surging Tuesday?

DoorDash Inc. DASH shares are on the rise Tuesday following positive coverage from Wolfe Research. The firm initiated coverage with an Outperform rating and price target of $130, suggesting potential upside of about 24%.

What To Know: Wolfe Research analyst Shweta Khajuria highlighted DoorDash’s strong position as a leading delivery platform with over 60% market share in the U.S. food delivery sector in a new note on Tuesday.

The order delivery company is expected to benefit from secular tailwinds in the underpenetrated market, driving sustainable growth through increased DashPass adoption, new verticals like grocery and retail and international expansion, according to Khajuria.

The Wolfe Research analyst sees potential for margin expansion and a clear path to GAAP profitability driving upside in the name. Khajuria expects DoorDash to achieve significant improvements in unit economics, advertising revenue growth and operational efficiency, which should contribute to meaningful free cash flow generation.

“Our OP rating is based on our view that DASH’s fundamental outlook for this year and next remains healthy as the company’s core US restaurant business continues to see healthy demand trends,” the Wolfe Research analyst said.

Despite the analyst’s positive outlook, risks include competitive pressures, regulatory challenges and potential macroeconomic headwinds that could affect consumer discretionary spending.

DASH Price Action: DoorDash shares were up 2.64% at $108.44 at the time of publication, according to Benzinga Pro.