Local commerce platform DoorDash, Inc. (DASH) is set to unveil its fiscal 2023 fourth-quarter earnings on February 15. Analysts anticipate a revenue surge of 23.8% year-over-year, projecting it to reach $2.25 billion. Additionally, the company's EPS for the quarter is forecasted to be $0.55.

In the third quarter, DASH exceeded sales and earnings projections, attributing its success to an expanding array of stores and enhanced service, attracting customers domestically and internationally. Total orders surged by 24% to 543 million, surpassing Wall Street's forecast of 521 million, as reported by FactSet analysts.

The company also reported a double-digit percentage increase in monthly active users in September, encompassing customers who made at least one order in the preceding month, driven by robust demand in both the U.S. and international markets. Additionally, order frequency growth accelerated from the second quarter.

Moreover, the company is expanding its non-restaurant operations, diversifying its platform's appeal to consumers. Having introduced grocery delivery in 2020 and convenience store delivery in 2021, DASH now facilitates delivery from 100,000 non-restaurant establishments in the United States, a significant increase from 40,000 two years ago.

RBC analyst Brad Erickson said, "DASH's Q3 report was sterling with a strong beat and raise in the face of ongoing consumer fears, and (it) prompts higher estimates." He added, "Frequency and product improvements are contributing to durable order and GMV growth; new verticals including grocery and international continue showing strong signals that investments are working, and advertising has barely gotten going."

In the current fourth quarter, DASH anticipates a gross order value of $17.2 billion at the midpoint of its range, surpassing analyst projections of $16.6 billion.

The stock plunged 1.7% intraday. However, it has gained 45.7% over the past six months and 96.3% over the past year to close the last trading session at $116.39.

Here are the financial aspects of DASH that could influence its price performance in the near term:

Recent Developments

On November 29, 2023, DASH unveiled its alliance with Best Buy Co., Inc. (BBY), the world’s largest specialty consumer electronics retailer, enabling swift delivery of a wide array of electronics. The collaboration would expand DASH's market reach and enhance its revenue potential by offering expedited delivery services for BBY products.

On September 18, 2023, DASH and ALDI, the longstanding grocery price leader, broadened their collaboration, enabling consumers to request on-demand alcohol delivery from over 1,200 ALDI outlets across 21 states via DASH. This would allow DASH to expand its service portfolio, potentially increasing revenue streams and customer engagement.

Solid Financials

During the fiscal 2023 third quarter that ended September 30, 2023, DASH’s revenue increased 27.2% year-over-year to $2.16 billion. Its adjusted gross profit grew 30.6% from the year-ago value to $1.05 billion. Also, the company’s adjusted EBITDA rose 295.4% from the prior year’s period to $344 million.

As of September 30, 2023, the company’s cash and cash equivalents amounted to $2.34 billion, up from $1.98 billion as of December 31, 2022.

Optimistic Analyst Estimates

The consensus revenue estimate of $8.57 billion for the fiscal year that ended December 2023 indicates a 30.2% year-over-year increase. In addition, the company’s EPS is expected to come in at $1.77. Also, DASH topped its consensus revenue estimates in all four trailing quarters.

Moreover, the company’s revenue and EPS for the current fiscal year ending December 2024 is estimated to grow 17.8% and 54.9% from the prior year to $10.10 billion and $2.74, respectively.

Mixed Profitability

The stock’s trailing-12-month gross profit margin of 47.39% is 33.5% higher than the 35.51% industry average. However, its trailing-12-month CAPEX/Sales of 1.71% is 44% lower than the 3.04% industry average. Additionally, DASH’s trailing-12-month asset turnover ratio of 0.83x is 15.1% lower than the 0.98x industry average.

Stretched Valuation

In terms of forward non-GAAP P/E, DASH is trading at 66.92x, 307.6% higher than the industry average of 16.42x. Its forward EV/Sales of 5.06x is 307.4% higher than the 1.24x industry average. Moreover, the stock’s forward Price/Sales of 5.50x is 475.7% higher than the industry average of 0.96x.

POWR Ratings Exhibit Mixed Prospects

DASH’s outlook is apparent in its POWR Ratings. The stock has an overall rating of C, which translates to Neutral in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. DASH has a B grade for Growth, underscoring its strong performance in the last reported quarter. However, the stock has a C grade for Stability, mirroring its 60-month beta of 1.72.

Furthermore, it has a D grade for Value, in sync with its stretched valuation. DASH is ranked #14 out of 29 stocks in the Internet - Services industry. Click here to access DASH’s Momentum, Sentiment, and Quality ratings.

Bottom Line

DASH's long-term growth is hinged on expanding its market reach and service offerings. By continually enhancing its platform, diversifying operations beyond restaurants, and forming strategic alliances with major retailers such as BBY and ALDI, DASH is aiming to attract and retain a broader customer base, driving sustained revenue growth.

While the company holds significant potential, it might be wise to wait for a more opportune entry point, considering its higher-than-industry valuation and current volatility.

How Does DoorDash, Inc. (DASH) Stack Up Against Its Peers?

While DASH has an overall grade of C, equating to a Neutral rating, you may check out these B-rated (Buy) stocks within the Internet - Services industry: Wix.com Ltd. (WIX), Shutterstock, Inc. (SSTK) and Similarweb Ltd. (SMWB). To explore more Internet - Services stocks, click here.

What To Do Next?

43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.

2024 Stock Market Outlook > 

DASH shares were trading at $118.28 per share on Wednesday morning, up $1.89 (+1.62%). Year-to-date, DASH has gained 19.61%, versus a 4.42% rise in the benchmark S&P 500 index during the same period.

Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.

More...