DoorDash: Transferring Coverage Amid Increasing Efficiency and Technological Prowess

Key Morningstar Metrics for DoorDash

• Fair Value Estimate: $170.00
• Morningstar Rating: 3 stars
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: Very High

We are transferring coverage of DoorDash DASH, maintaining a narrow moat rating, and increasing our fair value estimate by 26% to $170 due to improving profitability and international and technological growth opportunities. While we view the stock as priced fairly by the market, DoorDash’s self-maintaining network effects and incremental data collection drive efficiency and engagement, reinforcing supply-demand dynamics and warranting the approximately 300% price/sales premium it trades at versus its peers.

DoorDash controls approximately 60% of the North American delivery market and has top-of-class engagement metrics, impressive order growth, and increasing efficiency. The firm collects valuable consumer data with every order on its platform, which is used to improve algorithms that allow for order batching, cost efficiency, and an increasing value proposition for advertising dollars, which largely flow directly to the bottom line. High engagement and order growth allow restaurants to scale their top line and understand preferences, reinforcing the supply side of the network. That strength reinforces consumer demand, thanks to a robust catalog of suppliers and quick delivery times.

DoorDash’s success in penetrating North America is ripe for replication in untapped international markets, and it is making headway with interesting product lines revolving around grocery and drone delivery. Since DoorDash’s 2022 Wolt acquisition, international revenue has grown rapidly and only makes up a small component of total revenue, offering additional runway. DoorDash has also made significant inroads in the attractive grocery delivery business with large-scale partnerships. Priming itself for the future, DoorDash is unique as the only food delivery app currently rolling out nascent drone delivery technology, which promises to reduce costs and decrease delivery times.