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DoorDash Stock Slides on Downgrade as Vaccine Is Launched

DoorDash stock was priced at $102 and opened for trading at $182 during last week’s IPO.

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Tom White got in front of history this month, recommending DoorDash shares before they even started trading. The D.A. Davidson analyst picked up coverage of the food-delivery company on Dec. 1, more than a week before the stock opened.

In his report, he set a Buy rating and $93 target price on the stock, while at the time, the indicated price range was $75 to $85 a share. The stock actually priced last week at $102, and opened for trading at $182, nearly twice White’s target price.

Now, White can brag about breaking ground in another sense. He is the first analyst to downgrade his rating on the stock. On Monday, he reduced his stance to Neutral, while increasing his target to $150.

Monday morning, DoorDash (DASH) stock was off 10.8%, to $156.08

“We believe DoorDash deserves a premium multiple due to its category leading scale, superior growth rate/market share gains, and early profit trends, but the stock’s current valuation appears to leave little room for any performance hiccups in [the company’s] core biz over the next year (possible, in our view, due to increasing regulation and still elevated competition in Food Delivery) and perhaps gives DoorDash full credit for building out its promising-but-nascent grocery/essentials biz,” he wrote.

White also reduced his revenue estimates for 2021 and 2022 by about 10% to reflect how the broad deployment of coronavirus vaccines could limit demand for food deliveries.

That’s no small point. As noted in a recent Tech Trader column in Barron’s, DoorDash is the opposite of a reopening play. The surge in business the company experienced during the pandemic seems unlikely to be sustained when people can safely return to going to restaurants. The news that vaccine distribution has finally begun is not good news for DoorDash shares.

The analyst said that at Friday’s closing price of $175, the company was valued at 12.9 times his estimate for 2022 sales, or 154 times estimated earnings before interest, taxes, depreciation and amortization. At that level, he noted, the stock trades at a 35% to 200% premium to the highest multiples achieved by a group of peers. The group he uses includes Grubhub (GRUB), Just Eat Takeaway (NL:TKWY), Delivery Hero (XE:DHER), Uber Technologies (UBER), Etsy (ETSY) Lyft (LYFT), ANGI Homeservices (ANGI), and Upwork (UPWK).

“A compelling upside scenario for shares over the next 12-months seems limited in our view,” White wrote.

Write to Eric J. Savitz at [email protected]

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