Like many others, DoorDash Inc. (NYSE: DASH) started as a big dream for a group of students, who perceived an opportunity to leverage the latest technology into a service.
After the initial success of PaloAltoDelivery.com, DoorDash launched in 2013, eventually becoming the leading food delivery service in the U.S. Nowadays the company connects over 450,000 merchants to over 20 million customers.
DASH Stock Price
DASH began trading in December 2020, scoring a big win, as the shares priced at $102 closed at $189.51 on the first day.
DASH Stock Forecast
Forecasting a high-growth, unprofitable stock that has recently been listed on the market is a challenging task. As its success heavily relies on future profitability, many assumptions exist. Several factors are worth considering:
- DASH is unprofitable, but it should become profitable within the next 3 years.
- The annual growth forecast is high (68.8%).
- The company has no debt.
- It offers no dividend yield.
- Significant insider selling has occurred over the last 3 months.
While high growth and no debt are positive catalysts, consider also that DASH is already worth over $70 billion.
This valuation exceeds companies from the delivery industry, like FedEx Corp. (NYSE: FDX), that are established market participants, profitable and even paying a dividend.
Furthermore, margins will always be a concern since the underlying business (food) is a fundamentally low-margin business because of high competitiveness and low barriers of entry.
DASH Stock News Summary
DoorDash just announced an official launch of its advertising platform for merchants. This addition will provide sponsored listings and homepage banners, becoming an additional income revenue.
Although similar, the business model is different compared to that which Uber Eats launched earlier this year. While Uber Eats charges the merchant for pay per click, DoorDash will charge only when a customer places an order through the ad. While it seems a fairer model, it will also be less profitable, especially given the plan to restrict the number of listings to keep the positive user experience.
Meanwhile, the company is expanding its business, signing a reseller agreement with United Natural Foods Inc. (NYSE: UNFI). This partnership will allow on-demand grocery delivery solutions to independent retailers nationwide through the DoorDash marketplace. Additionally, the company is expanding alcohol delivery across 20 states and parts of Canada and Australia — reaching 100 million users worldwide.
How to Buy DoorDash Stock
Follow these 4 steps to buy DASH stock.
Step 1: Pick a brokerage.
The easiest and most convenient way to buy a stock is through a brokerage — a regulated
intermediary between you (the investor) and the stock market. In the past, this process involved brokers and phone calls, but nowadays you can buy and sell stocks through web platforms or even your phone in just a few seconds. If you are a first-time investor, check out Benzinga’s broker comparison table below.
- Best For:Active and Global TradersSecurely through Interactive Brokers’ website
- Best For:Traders of All Levelssecurely through Moomoo's website
- Best For:Mobile Userssecurely through Plus500's website
- Best For:Momentum traderssecurely through Centerpoint Securities's website
- Best For:Intermediate Traders and Investorssecurely through Webull's app
Step 2: Decide how many shares you want.
The number of shares to buy depends on share price, portfolio size and risk management strategy. As DASH is trading at over $200 per share, you might want to prioritize a broker that allows fractional ownership, especially if you are starting with a modest sum.
Step 3: Choose your order type.
You can use different ways to instruct your broker on buying shares; thus, it is necessary to understand the basics before investing. Consider practicing on the broker’s demo platform before executing the first live trade.
- Market order: This order directs your broker to buy or sell shares immediately, regardless of price. It is the fastest way, but you might get a slightly worse entry price.
- Limit order: This order will work only at a certain level or better. For example, if the DASH price is $216 and you put in a limit order at $215, it will execute only if the price falls and reaches that level. This type of order is perfect for dealing with smaller cap stocks where liquidity can be an issue. As DASH is a large-cap stock with over 1 million shares traded per day, you shouldn’t be worried about volume-related issues.
- Bid: This is the greatest price a buyer is willing to pay at the moment.
- Ask: This is the smallest price at which the seller is selling at the moment.
- Spread: This is the difference between the bid and the ask. For example, if the bid for DASH is $214.82, and the ask is $215.63, then the spread is $0.81. A narrow spread is a sign of good liquidity in the market.
Step 4: Execute your trade.
After you have executed the trade, the broker processes the order for you. You officially own the shares only after the order has been filled, so keep an eye on broker confirmations and statements.
DASH on Benzinga Pro
DoorDash is doing very well in 2021, with the stock up over 50%. Yet, the volatility of an unprofitable, high-growth stock is hard to avoid.
Although the stock has been climbing for months, those who bought it early in the year might still be in the red. Initially, it closed as high as $215, touching even higher intra-day before crashing as low as $113.
The current outlook is bullish, with the stock keeping above the important support ($200) and both the 50-day and 200-day moving averages.
Rich Valuation on Thin Margins
While food delivery is still a young industry, it was on a healthy growth path before the pandemic threw it into overdrive practically overnight.
Yet, this transformation didn't help the market leader like DASH to become profitable. Although the company is expanding, it is still facing headwinds. First of all, it is the demand slowdown post-pandemic. Then, it is the question of worker shortages and higher regulations regarding gig workers.
Overall, the problem with DASH is that it is a labor-intensive, thin-margin business in a market with low barriers of entry.
Frequently Asked Questions
Who is DoorDash owned by?
With a stake of 47.4%, institutions own the majority of the company. As DoorDash just recently listed on the stock exchange, unsurprisingly, venture capital and private equity firms have a significant stake as well, at 31.6%. Finally, the general public and insiders each hold about 10%.
The largest individual stakes are by SoftBank Investment Advisers Limited (12.89%), Sequoia Capital Operations LLC (11.66%) and GIC Special Investments Pte (7.08%).
Is DoorDash actually profitable?
Despite a record-breaking business during the pandemic, DoorDash is not yet a profitable company.
With thin profit margins, food delivery is highly reliant on cost-optimization. On average, DoorDash earns only 2.5% of the customer’s bill. In solid numbers, this equals $0.90 from the average order of $36 during the height of the pandemic. The majority of the cost goes to the delivery person, with refunds and advertising costs taking a fair share as well. Analysts expect the company to become profitable within the next 3 years.
About Stjepan Kalinic
Forex, Equity Analysis, and Financial Education