DoorDash (NYSE:DASH) is having another bad week, suffering losses that outpace its competitors. But does that make DASH stock a disappointment, or does it make it more interesting?
If you said “Both,” then you’ve got the right answer.
On the surface, DASH losses exceed others in the space. The San Francisco-based food delivery company is down more than 10% so far this week, and extending its year-to-date losses to 38%.
Meanwhile, Uber Technologies (NYSE:UBER) is down only 2% on the week; Grab Holdings (NASDAQ:GRAB), which operates in southeast Asia, lost 6%, and Just Eat Takeaway.com (OTCMKTS:JTKWY) the owner of Grubhub, lost 8%.
Actually, the losses aren’t a huge surprise. Remember, last year was the go-go year for service companies like DoorDash. Business was booming during the Covid-19 pandemic as people were forced to stay at home and stimulus checks meant plenty of extra cash to spend on restaurants that were trying to stay open.
DoorDash has already announced that it would reduce its hiring this year in an effort to control costs. After increasing the headcount by more than 50% to over 8,600 people last year during the pandemic, DoorDash now plans to expand by just 10% to 15% this year.
And the space will be fraught with danger this year, particularly with inflation at record levels. The Federal Reserve appears determined to raise interest rates quicker than first envisioned, and less spending will mean less discretionary income for dining out (or in this case, ordering in).
But then, look at the opportunity. Priced at roughly $92 now, DASH stock is far below its 52-week range of $257. And with an average price target of $166 (according to 20 analysts documented on Yahoo Finance), there’s about 80% upside in DoorDash at these levels.
Earlier this week, Citi analyst Ronald Josey initiated coverage of DASH stock with a “buy” rating and a price target of $155. Josey said DoorDash is one of his top picks in the internet sector, which he considers to be “healthy” as consumer engagement grows online.
On the date of publication, Patrick Sanders 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.