Why Wells Fargo Is Waiting For Better DoorDash Entry Point

Food delivery platform DoorDash Inc DASH could become an "iconic consumer brand," but investors should wait for a better entry point before buying the stock, according to Wells Fargo.

The DoorDash Analyst: Brian Fitzgerald initiated coverage of DoorDash's stock with an Equal Weight rating and $185 price target.

The DoorDash Thesis: DoorDash has the resources in place to become the only delivery company that can experience hyper-growth and generate a profit, Fitzgerald said in an initiation note. The company is operating today from a position of strength, as its market share is twice the size of its nearest rival Uber Technologies Inc UBER, the analyst said. 

DoorDash's premium DashPass service is five times the size of Uber's similar service, at 5 million subscribers versus 1 million, he said.

DoorDash also stands out from its restaurant delivery peers through its white label delivery service, Drive, which struck partnerships with grocery stores, Fitzgerald said. 

Related Link: 3 Analysts Debate DoorDash's Stock As IPO Quiet Period Ends

"We believe the pieces of the puzzle indicate ambitions grander than (only) an online food marketplace: DASH endeavors to develop into a "decentralized" alternative to AMZN's more vertically integrated eCommerce model." 

Despite an encouraging outlook, DoorDash's stock "looks expensive" with an EV/MAU (monthly active user) of around $3,300, twice that of Uber and four times that of Europe's Just Eat Takeaway.com, the analyst said.

Investors may find a more favorable entry point once the back half 2021 year-over-year comps have been de-risked, according to Wells Fargo.

DASH Price Action: Shares of DoorDash were trading higher by 5.7% Wednesday morning at $209.51.

Photo courtesy of DoorDash.