DoorDash Inc DASH has announced a new partnership with BJs Wholesale Club Holdings Inc BJ in which even non-BJ's members can get same-day grocery delivery through BJs.com. The partnership covers all 226 BJ's locations in 17 different eastern U.S. states.
The Numbers: On Tuesday, Bank of America analyst Michael McGovern said DoorDash is very well-positioned to gain market share in the massive $830 billion U.S. grocery, convenience and alcohol market, which he estimates is only about 8% penetrated by online sales today. McGovern said DoorDash is the market leader in online convenience, but it is currently trailing in the grocery category behind Amazon.com, Inc. AMZN, Walmart Inc WMT and Instacart.
"With much faster delivery speeds than some competitors, DoorDash is poised to take share in Grocery, particularly with improved supply and new partnerships that add delivery options," he said.
DoorDash isn't the only delivery service that has announced major grocery partnerships. Uber Technologies Inc UBER recently added Costco Wholesale Corporation COST as a grocery delivery partner as well.
McGovern estimates DoorDash and Uber generated a combined $5 billion in non-restaurant delivery bookings in 2021, up 132% year-over-year.
How To Play It: Despite the ongoing pandemic recovery and rising grocery inflation, Bank of America estimates online food spending is up 6% in the first quarter compared to 2021. McGovern said investors can anticipate more grocery delivery partnerships for DoorDash in the near future, which could serve as a bullish catalyst for the stock.
Bank of America has a Buy rating and $200 price target for DoorDash, and a Buy rating and $55 price target for Uber.
Benzinga's Take: DoorDash is a great option for investors looking for a delivery pure-play stock. Uber's business is more diversified, given it has both a large delivery business and a large mobility business.
Photo: courtesy of doordash.news
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