DoorDash stock (NYSE: DASH) has declined by about 34% thus far in 2022, and remains down by over 60% from highs seen last November 2021. In fact, the stock now trades below its IPO price of $102 per share. The sell-off comes as investors rotate out of richly valued stocks and pandemic winners, into value stock as the Federal Reserve signals multiple rate hikes through 2022. DoorDash, which traded at almost 20x revenues at its peak and has yet to turn profitable, has been particularly badly impacted by this shift. There are also concerns about the impact of surging inflation on the company’s earnings, given the rise in labor, gasoline, and food prices. So is DoorDash stock a buy at current levels of around $96 per share? While we had largely been bearish on DoorDash stock ever since it went public in late 2020, we think the stock is worth a look for investors seeking to play the delivery market following the sizable recent correction.
There are multiple factors that could drive the stock higher. Firstly, Covid-19 cases in the U.S. surged through the holidays and into early January, peaking at over a million cases per day. This is likely to have caused more people to order in rather than head to restaurants, helping demand for DoorDash’s services. We could see a partial impact of this in DoorDash’s Q4 results, which are likely due in February. We also think there is room for growth for the company even post the pandemic. We got a sense of this in 2021 when DoorDash posted strong revenue growth despite restaurants re-opening. DoorDash’s well-received DashPass subscription program, which has over 9 million subscribers, could also help stabilize its business. Moreover, the company’s international expansion plans are also gaining traction following its acquisition of fast-growing European food delivery company Wolt, which enables it to enter 22 new markets. That being said, we still have some concerns regarding the company’s unit economics and lack of profitability, despite the big surge in demand through the pandemic.
We value DoorDash stock at about $130 per share, roughly 35% ahead of the current market price. See our analysis DoorDash Valuation: Expensive Or Cheap? for more details on DoorDash’s valuation. See our dashboard on DoorDash Revenue for an overview of DoorDash’s business model and how its revenues are likely to trend.