Hold DoorDash’s Shares Since Food Delivery Is Alive and Well

Food delivery company DoorDash (NYSE:DASH) gained celebrity status during the onset of the Covid-19 pandemic. By the time DASH stock subsequently debuted on the New York Stock Exchange (NYSE), many buyers were waiting to scoop up its shares.

Close up of Doordash logo and symbol displayed at the entrance to one of their offices

Source: Sundry Photography / Shutterstock.com

Fast-forward to early 2022, and the sentiment toward DoorDash isn’t as optimistic as it once was. Skeptics might even claim that the food-delivery market is in major trouble because some people are eating at restaurants again.

This concern appears to have been priced into DASH stock during the past few months. With the stock below its peak price, prospective investors might wonder whether it’s time to take a long position in the name.

As always, we’ll allow the financial data to drive our decisions. In the final analysis, selling DoorDash’s shares now would be a hasty, ill-advised move.

A Closer Look at DASH Stock

Going back to where it all started, DoorDash established an initial public offering (IPO) price range of $90 to $95, but then chose to price the shares at $102.

However, DASH stock actually began trading on the NYSE at $182 per share. At the end of that first trading session, the stock closed up more than 85%.

Amazingly, DoorDash’s shares climbed as high as $257.25 during the past 52 weeks. Yet this morning they’re trading around $103.

The stock does seem to have some support at $125, established in March and April of last year. As technical analysts sometimes say, though, a support level can become a resistance level.

As a result, it’s wise to keep an eye on the $100 and $125 areas, as they could soon become battle zones between the buyers and the sellers.

Beating the Street

Feb. 16, 2022 was a crucial day for DoorDash. Without a doubt, the company’s critics were waiting for DoorDash’s fourth-quarter 2021 earnings report to be disappointing.

Much to their chagrin, the company demonstrated that the food delivery market isn’t heavily slumping -and that DoorDash is faring well within that niche market.

The company’s recent success was illustrated by a number of financial metrics. For one thing, DoorDash’s Q4 revenue grew 34% year-over-year to $1.3 billion, beating the analysts’ average forecast of $1.28 billion.

Do you need more data points? No problem. In Q4, DoorDash had 369 million total orders, up 35% YOY. Furthermore, the company’s marketplace gross order volume (GOV) totaled $11.2 billion, representing a YOY improvement of 36%.

Reflecting on 2021 as a whole, DoorDash cited “higher-than-expected consumer retention and new consumer growth” as drivers of the company’s stellar performance.

Executing Exceptionally Well

Looking ahead, DoorDash is expecting Q1 marketplace GOV of $11.4 billion to $11.8 billion ; that’s not too shabby.

Apparently, JMP Securities analyst Andrew Boone is duly impressed with DoorDash’s recent performance. He said that DoorDash is “executing exceptionally well” and even declared, “We’re buyers here.”

In defense of this position, Boone cited DoorDash’s addition of 150,000 restaurants to its platform in 2021, pointing to a home delivery market that’s staying strong.

Given the company’s encouraging data points, DoorDash co-founder and CEO Tony Xu had every right to draw a positive conclusion about the market’s future prospects.

“I think clearly takeout and delivery, as shown by our performance not just in the fourth quarter but also in 2021… they are complementary. It’s very possible to eat inside of a restaurant and get delivery,” Xu explained.

The Bottom Line

There’s no denying that DASH stock is well below its peak price. Yet that does not necessarily reflect badly on DoorDash’s business.

The company’s 2021 results should put concerns about the food delivery market to rest. At the very least, DoorDash has demonstrated its ability to execute well.

So it’s not a bad idea to consider taking a small, speculative position in DASH stock today. Just watch the $100 and $125 levels closely and gauge whether the buyers or the sellers are in control.

On the date of publication, David Moadel 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.

Article printed from InvestorPlace Media, https://investorplace.com/2022/03/hold-dash-stock-as-home-deliverys-demise-is-shown-to-be-a-myth/.

©2023 InvestorPlace Media, LLC