JMP Securities analyst Andrew Boone reiterated DoorDash Inc (NYSE: DASH) with a Market Outperform and a $100 price target.
Ahead of earnings scheduled for August 2, the analyst increased his 2024 EBITDA by 10% due to increased confidence that new verticals are maturing while expecting strong 2Q23 results as third-party app engagement suggests DAU growth accelerated.
While Boone acknowledged concerns around a softening U.S. consumer and the run in shares as they are up 43% since reporting 1Q23 earnings (vs. +20% for the NASDAQ), DoorDash continues to take a percentage of the food delivery market (from Grubhub).
At the same time, the company's increased focus on new verticals gives confidence that these categories can further scale.
With healthy industry competitive dynamics and new vertical and international investments maturing, the analyst thinks profitability can surprise to the upside into 2024.
DoorDash and Wolt DAU growth accelerated to +2% Y/Y in 2Q23, up from approximately flat Y/Y in 1Q23. With food away from home, inflation remained at 8.2% in 2Q23 per the BLS, and dining frequency (conversion from DAU to GOV) is likely still healthy as DashPass penetration grows.
In June, DoorDash released an app update highlighting grocery and retail on the bottom navigation bar (replacing restaurant pickup). With 100K+ non-restaurant merchants on the platform and significant progress in grocery with 20+ top U.S. grocers on the forum, this UX change should accelerate demand.
In Boone's usage of Uber Technologies, Inc (NYSE: UBER) Uber Eats, he sees two ad slots compared to one for DoorDash. Given the rationality in the industry, he sees an opportunity for DoorDash to increase ad load and grow ad revenue.
Boone's 2024 EBITDA is now 4% ahead of consensus. Given his view that new verticals are maturing and ad load can expand, he raised his 2024 EBITDA by 10%, primarily through a 10bps take rate increase.
Boone justified his valuation based on DoorDash's growing share of the domestic food ordering market, potential around newer businesses, and expanding profitability.
Price Actions: DASH shares traded higher by 1.66% at $91.14 on the last check Monday.