The logistics platform provider DoorDash Inc. (DASH), which is mainly known for its food delivery app, skyrocketed following its debut on the NYSE on December 9, 2020. The stock had closed up more than 85% after it began its trading at $182 per share on that day.

On a year-to-date basis, the stock has gained 26.5% to close yesterday’s trading session at $180.58. But this gain can largely be attributed to the increased demand due to the pandemic and the stock is likely to dive once the pandemic subsides. Also, DASH faces strong competition from companies such as UberEats of Uber Technologies, Inc. (UBER) and GrubHub Inc. (GRUB).

The following factors might determine the stock’s performance shortly:

Growing Market Reach Across Various Categories

In December 2020, DASH expanded its exclusive partnership with the pizza company Little Caesars, adding Little Caesars to its marketplace throughout the United States and Canada. DASH also introduced DoorDash Self-Delivery so that restaurants that wish to use their in-house delivery staff can do so.

The company expanded its services to the healthcare space as it teamed up with Sam’s Club Pharmacy in October 2020 to exclusively power its same-day prescription delivery program nationwide via DoorDash Drive.

Reducing Pandemic Benefits

The pandemic proved to be a catalyst for the companies that relied on digital means to run their business. This proved to be an advantage for DASH too as its business gained significantly amid the pandemic. However, as the economy gradually recovers from the pandemic with the vaccination efforts, the future for DASH looks uncertain. That’s because the demand for its services might decrease, as people might want to go to restaurants instead.

Weak Financials and High Valuation

According to the company’s S-1 filing, its revenue was $1.92 billion for the nine months ended September 30, 2020. However, the company is yet to turn profitable. It reported a net loss of $149 million over the same period. Moreover, the company is significantly overvalued with a forward P/S of 20.08x, which compares to the industry average of 1.33x.

POWR Ratings Don’t Indicate Enough Upside

DASH has an overall rating of C which equates to Neutral in our POWR Ratings 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 different categories. Out of these categories, DASH has a grade of D for Value, consistent with its higher-than-industry P/S Ratio.

Moreover, the stock has a grade of D for Sentiment, as analysts are uncertain about its future outlook amid severe competition from its peers, and the stock has been a favorite of retail traders.

In addition to this, you can click here to access DASH’s POWR Ratings for Growth, Momentum, Stability, and Quality.

The stock is ranked #29 of 47 stocks in the Internet-Services industry. To learn about three top-rated stocks in the same industry, click here.

Bottom Line

Even though DASH had a strong market debut and has outperformed the broader market so far this year, it is wise to wait for a meaningful correction before investing. In addition to the stock being overvalued, the company’s prospects look bleak due to competition and regulatory risk.

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DASH shares were trading at $189.00 per share on Thursday afternoon, up $8.42 (+4.66%). Year-to-date, DASH has gained 32.40%, versus a 2.89% rise in the benchmark S&P 500 index during the same period.

About the Author: Manisha Chatterjee

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...

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