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DoorDash Still Isn’t a Buy as It Reduces Hiring Efforts

DASH stock - DoorDash Still Isn’t a Buy as It Reduces Hiring Efforts

Source: Sundry Photography / Shutterstock.com

Food delivery specialist DoorDash (NYSE:DASH) is feeling the heat as people return to pre-pandemic activities. To control costs, DASH stock announced it would be stepping off the gas with its hiring this year, growing headcount by just 10% to 15%.

DoorDash’s employee count increased by more than 50% to over 8,600 last year. The company’s Chief Financial Officer Prabir Adarkar commented on the development, saying it needs to control employee growth without impacting the underlying business.

DASH stock was on quite a run during the early days of the pandemic, with Covid-19 restrictions causing people to order takeout more often. Its sales increased by a mind-boggling 226% from 2019 to 2020. Moreover, its operating margins improved significantly from a negative 69.6% to a negative 15.1% during the period. On top of that, it generated $93 million in free cash flow in 2020.

2021 was incredible as well, but DASH stock saw a marked slowdown in top-line growth in the past few quarters. For instance, its revenue for the second quarter last year increased by 83.7%, while that figure was 34% during the fourth quarter. Moreover, the slowdown in its top line will have to weigh down its operating leverage.

Consequently, it faces market uncertainty, which is why DASH stock trades in the red. It shed more than 49% of its value in the past six months.

The downturns in tech stocks and post-pandemic headwinds have weighed down DASH stock, but it trades at more than 7.5 times forward sales estimates. If the business can move toward profitability, its valuation could potentially be justified.

However, at this stage, DASH stock isn’t cheap enough to warrant an investment. It has an unclear path to profitability despite performing extraordinarily in the past couple of years.

On the date of publication, Muslim Farooque 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

Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.

Article printed from InvestorPlace Media, https://investorplace.com/2022/04/dash-stock-still-isnt-a-buy-as-it-reduces-hiring-efforts/.

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