DoorDash is the IBD Stock of the Day for Thursday. Shares are approaching a cup-with-handle buy point as the app-based food and grocery delivery company continues to show strength despite concerns about the consumer economy.
On the stock market today, DoorDash gained a fraction to close at 130.19. Shares are just below a 131.21 handle buy point, according to MarketSurge. DoorDash stock has gained 31% this year, outpacing the S&P 500's 16.5% gain.
In early August, DoorDash reported better-than-expected sales and adjusted earnings for its June-ended second quarter. The results helped quell concerns from investors about consumers cutting back on delivery spending.
"We're seeing really strong demand on the consumer side," DoorDash Chief Executive Tony Xu told analysts following the Aug. 1 earnings report.
DoorDash And The Convenience Economy
For its second quarter ended June 30, DoorDash pulled in a better-than-expected $2.6 billion in sales, up 23% from a year earlier. The total value of orders on its marketplace increased 20% to $19.7 billion.
Meanwhile, DoorDash posted a wider-than-expected loss of $157 million, or 38 cents per share. But investors often more closely watch DoorDash's earnings before interest, taxes, depreciation, and amortization, or EBITDA. DoorDash's adjusted EBITDA for Q2 increased 54% to $430 million. That beat expectations of $391 million.
DoorDash stock jumped 8% the day after the report. Shares have gained about 20% total in the weeks following the report. That has helped DoorDash stock nearly recover to 52-week highs reached earlier this year at 143.
The strong results from DoorDash came despite some restaurant companies and retailers warning investors that customers were growing more careful with their spending. Those macro concerns drove DoorDash stock lower in the weeks leading up to the report.
DoorDash rivals Uber and Instacart also posted better-than-expected Q2 results.
In a note to clients in August, Bernstein analyst Nikhil Devnani said investors may have "underestimated the stickiness of the convenience economy."
DoorDash Stock Analyst Sees Big Market Opportunity
Founded in 2013 as Palo Alto Delivery, DoorDash operates in more than two dozen countries. It has also expanded from food delivery to include grocery and broader retail. It recently added delivery options from Mattress Firm into its app.
In a note to clients Tuesday, Evercore ISI analyst Mark Mahaney reiterated an outperform rating for DoorDash stock and a price target of 155, implying 19% upside. He cited the large total addressable markets of food delivery and grocery that DoorDash is targeting.
"Our TAM analysis supports our view that DoorDash faces at least two $1 (trillion) TAMs and has less than 10% share of its directly addressable market segment, suggesting the company can sustain premium growth for a long time," Mahaney wrote.
Analysts on average are projecting DoorDash will eke out its first annual GAAP profit this year of 3 cents per share, according to FactSet. That's after losing $1.42 per share last year and posting a deficit of $3.68 per share in 2022.
DoorDash Stock Eyes Buy Point
DoorDash stock decisively retook its 21-day line with a 3.3% gain on Wednesday. The move helped break a short two-week downtrend and offered a potential early entry.
Boosted by its Q2 results, DoorDash stock's Relative Strength Rating has climbed to 89 out of 99. That indicates DoorDash has outperformed 89% of stocks tracked by IBD over the past 12 months. The relative strength line has bounced back from Uber's slump this spring, though it is still below highs from the start of the year.
Meanwhile, DoorDash stock holds an IBD Composite Rating of 81 out of a best-possible 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one. The best growth stocks typically have a Composite Rating of 90 or better.
