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Why Wells Fargo Is Waiting For Better DoorDash Entry Point

Why Wells Fargo Is Waiting For Better DoorDash Entry Point

Food delivery platform DoorDash Inc (NYSE: 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 (NYSE: 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, 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. 

Latest Ratings for DASH

Apr 2021Evercore ISI GroupInitiates Coverage OnIn-Line
Apr 2021Wolfe ResearchInitiates Coverage OnOutperform
Mar 2021DA DavidsonMaintainsNeutral

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