After DoorDash (NYSE:DASH) became the leading food delivery service in the U.S. and generated positive cash flow from operations in 2021, I remain very bullish on DASH stock.
Also importantly, DoorDash recently acquired a sizeable overseas company, giving it a good opportunity to grow tremendously in many lucrative, foreign markets. Also worth noting is that multiple Wall Street analysts are very upbeat on the company’s shares.
Leading U.S. Food Delivery Company and Positive Cash Flow
According to a Bloomberg chart presented in November by Seeking Alpha columnist Robert Vink, DoorDash grew much more than its main competitors in the U.S. food delivery market during the coronavirus pandemic.
Specifically, based on an index that gives each company’s January 2018 sales a weighting of 100, DoorDash went from about 175 just before the pandemic began in the U.S. to just over 400 in September 2021. As a result, its share of the U.S. food delivery market in September jumped to 57%, more than double the 23% share of the second-leading player in the market, Uber’s (NYSE:UBER) Uber Eats.
Moreover, in 2021, DoorDash’s cash flow from operating activities came in at a hefty $692 million, up from $252 million in 2020. Even excluding stock-based compensation, it had $206 million of cash flow from operations last year, versus a loss of $80 million in 2020.
For this year, analysts, on average, expect the food delivery company to report a loss of $1.08 per share, an improvement over the loss of $1.39 per share that the company generated last year. As a result, I believe that DoorDash’s cash flow from operations will come in even higher this year than in 2021.
A High-Potential Acquisition
In November, DoorDash acquired Finland-based food delivery company Wolt in an all-stock deal, worth 7 billion EUR at the time. With at least a foothold in 23 countries, including Sweden, Japan and Norway, Wolt will give DoorDash the opportunity to grow the combined company’s foreign sales very rapidly.
Given DoorDash’s success in the U.S. and its net cash of $3.36 billion as of the end of last quarter, which it can use for marketing purposes overseas, I’m confident that the company will do very well in many foreign markets.
Multiple Analysts Are Upbeat on DASH Stock
In the wake of DoorDash’s Q4 results, JPMorgan analyst Doug Anmuth thinks that DoorDash’s gross order value can climb going forward, as the food delivery market changed since the pandemic. He set a $162 price target on the shares.
Also upbeat on DASH stock was RBC Capital analyst Brad Erickson. He believes that DoorDash should be able to “expand both categorically and geographically going forward.” And, although Erickson wrote that the company could endure “occasional deceleration” in the post-pandemic era, he expects its results to beat analysts’ average estimates in the future. Erickson, however, cut his price target on the name to $142 from $175.
Finally, Wolfe Research analyst Deepak Mathivanan stated that, although many markets were normalizing as the pandemic eased, the demand for DoorDash’s deliveries was little changed. The analyst cut his price target on the name to $170.
The Bottom Line
The enterprise value-sales ratio of DASH stock is 6, according to Marketwatch. Given DoorDash’s positive cash flow from operations in 2021 and analysts’ average estimate of 7% revenue growth for the company this year, that’s a rather low multiple for the shares.
Meanwhile, the easing of the pandemic does not appear to be hitting the demand for DoorDash’s deliveries, and the company’s overseas sales should surge in the wake of its acquisition of Wolt. Finally, as I pointed out in my previous column on DoorDash, the company’s shares should get a lift from reduced fears about the Fed and from consolidation in the food delivery sector.
Given these points, I continue to recommend that investors buy DASH stock.
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Larry Ramer has conducted research and written articles on U.S. stocks for 14 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.
