DoorDash, Inc. (DASH) operates a logistics platform that connects merchants, consumers, and dashers in the United States and internationally. It operates DoorDash marketplace, DoorDash Drive, and DoorDash Storefront.

The company witnessed a decline in app usage as the pandemic-era food delivery trend gradually faded as people returned to restaurants. Moreover, higher food prices with inflation running at a multi-decade high can curb demand.

DASH’s shares have lost 51.4% year-to-date and 56.7% over the past year. However, it has gained 17.4% over the past month, closing the last trading session at $72.44.

DASH and Loblaw Companies Limited announced their new collaborative grocery delivery service to customers in Canada last month. The program, PC Express™ Rapid Delivery, aims to make grocery and convenience items available to customers within 30-minutes.

However, DASH could face heightened competition from Amazon.com, Inc. (AMZN), the new entrant in the food delivery industry. On July 6, 2022, AMZN launched a free, one-year Grubhub+ membership with no food-delivery fees on eligible orders for all U.S. Prime members.

Here is what could shape DASH’s performance in the near term:

Bleak Bottom Line

For the first quarter ended March 31, 2022, DASH’s revenue came in at $1.46 billion, up 35.2% year-over-year.

However, its loss from operations increased 74.7% year-over-year to $173 million. In addition, its net loss increased 51.8% year-over-year to $167 million, while its loss per share came in at $0.48, up 41.2% year-over-year. Also, its total cash, cash equivalents, and restricted cash came in at $2.25 billion, down 44% year-over-year.

Stretched Valuations

DASH’s forward EV/S of 4.04x is 274.2% higher than the industry average of 1.08x. Its forward P/S of 4.66x is 453.2% higher than the industry average of 0.84x. Moreover, its forward EV/EBITDA of 99.75x is significantly higher than the industry average of 8.13x.

Poor Profit Margins

DASH’s trailing-twelve-month net income margin of negative 9.97% is lower than the positive industry average of 6.56%. Its trailing-twelve-month EBIT margin and EBITDA margin of negative 9.78% and 7.86% are also lower than the positive industry averages of 8.92% and 12.01%, respectively.

Furthermore, DASH’s negative trailing-12-month ROCE, ROTC, and ROTA of 11.40%, 6.51%, and 7.70%, compare with the respective positive industry averages of 17.15%, 7.16%, and 5.63%.

POWR Ratings Reflect Bleak Prospects

DASH has an overall rating of D, equating to Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

DASH has a Value grade of D, consistent with its higher-than-industry valuation multiples. It has a C grade for Growth, in sync with its mixed financials in the last reported quarter.

The stock has a D grade for Stability, in sync with its 24-month beta of 1.80.

In the 30-stock Internet – Services industry, DASH is ranked #26. The industry is rated F.

Click here for the additional POWR Ratings for DASH (Momentum, Sentiment, and Quality).

View all the top stocks in the Internet – Services industry here.

Bottom Line

DASH has reported solid revenue growth in the last reported quarter. However, its weak bottom line is concerning. Also, considering its poor profitability and stretched valuations, it could be wise to avoid the stock now.

How Does DoorDash, Inc. (DASH) Stack Up Against its Peers?

While DASH has an overall POWR Rating of D, one might consider looking at its industry peers, Perion Network Ltd. (PERI), Shutterstock, Inc. (SSTK), and Liquidity Services, Inc. (LQDT), which have an overall B (Buy) rating.

DASH shares were trading at $74.33 per share on Tuesday afternoon, up $1.89 (+2.61%). Year-to-date, DASH has declined -50.08%, versus a -16.86% rise in the benchmark S&P 500 index during the same period.

About the Author: Riddhima Chakraborty

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...

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