Food delivery services were on a roll during the pandemic, and it’s not hard to see why. With social activities on the backburner and consumers stuck at home, companies such as DoorDash (DASH) reaped the benefits. The question is, can the momentum be sustained in a post-pandemic environment?
The early signs for DoorDash are promising, as evidenced in the company’s Q1 revenue display; sales more than tripled from the same period last year. The company’s pivot toward adding extra services is also bearing fruit and the new customers added during the pandemic appear to be sticking around.
Both facts were recently highlighted by Needham analyst Bernie McTernan.
“New customer behavior continues to show high order frequency to go along with higher order frequency in the base as well,” the analyst said. “COVID has provided some tailwinds to engagement but product enhancements have also helped like more restaurants, network efficiency, DashPass, etc.”
The standout metric from the earnings was the company’s “non restaurant growth,” which increased to 7% of total orders with Drive – the company’s fulfillment offering that lets businesses deliver orders that came from outside the DoorDash marketplace – continuing to “provide tailwinds to this diversification.”
As far as the DASH marketplace is concerned, McTernan points out that as more “verticals” are added, particularly ones with “daily use cases,” the relative value provided by DASH should lead to higher customer engagement.
These are all good signs for the bulls, the analyst notes. However, McTernan also warns that the company’s grocery and international initiatives are “likely not needle movers soon.”
While the company is in the process of bringing on more grocery partners and expanding the national footprint, most grocery users are utilizing DASH for top-off orders and not yet using the company for weekly shopping needs.
That said, as McTernan notes, this could all change in the long-term.
“We believe our long-term estimates are achievable only using the US restaurant TAM, meaning there is potential upside as DASH adds more verticals and expands internationally,” the analyst summed up.
So, down to business, what does it all mean for investors? McTernan reiterated a Buy on DASH stock, while the $175 price target remains put, too. There’s potential upside of 23% from current levels. (To watch McTernan’s track record, click here)
The Street’s average target sits just below McTernan’s forecast, and at $172.3, suggests 12-month gains of 25%. Overall, the stock has a Moderate Buy consensus rating based on 6 Buys vs. 7 Holds. (See DASH stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.