Up 41% YTD, This Standout Growth Stock Has More Upside Ahead

The Fed's “higher for longer” interest rate regime created a challenging environment for growth stocks in recent years, which often rely on short-term debt financing to fuel the early stages of their development. Add in a cash-strapped U.S. consumer, as shoppers waged their own personal inflation fight right alongside the Fed, and consumer-facing growth stocks had quite an uphill climb to face in the post-pandemic market. 

However, with the inflation battle mostly over and interest rates getting an aggressive haircut at last week's Fed meeting, the outlook for growth stocks is getting a little brighter. One name that stands to benefit is DoorDash (DASH), which has already been quietly outperforming the broader equities market in 2024 - and has recently racked up a few bullish analyst notes as its fundamental outlook improves, too. Here's a closer look.

About DoorDash Stock

DoorDash Inc. (DASH) is a food delivery company that connects merchants with customers through its platform in the U.S. and internationally. They operate DoorDash Marketplace and Wolt Marketplace after its acquisition of Wolt in 2022, a company that provides services such as customer acquisition, demand generation, payment processing, customer support, and more. They also offer paid subscription-based services such as DashPass and Wolt+.

Initially known as Palo Alto Delivery during its founding in 2013, the company changed its name to DoorDash in 2015. Valued at $57.1 billion, the company has its headquarters in San Francisco.

The Nasdaq-100 Index ($IUXX) component is down 45% from its late 2021 highs, but DASH has easily outperformed the broader market in recent years. The stock is up 41% so far in 2024, 83% over the past 52 weeks, and 168% over the past two years.

DoorDash Reports Mixed Results

The food delivery specialist released its Q2 results on Aug. 1, and reported a substantial 23% rise in revenue to $2.6 billion, which beat analysts' expected $2.5 billion. Total orders during the quarter rose 19% to $635 million, ahead of the market’s expected $625 million. The GAAP net loss totaled $0.38 per share, wider than Wall Street’s estimated $0.10 per share.

Adjusted gross margin for the quarter came to 49.2%, in line with last year, while the company increased its research and development expenses by 20% to $156 million. Adjusted EBITDA reached an all-time high of $430 million during Q2. 

Net cash generated by operating activities improved to $530 million, while free cash flow rose to $451 million.

Management guided for Q3 marketplace Gross Order Value (GOV) in the range of $19.4 billion to $19.8 billion, while adjusted EBITDA is expected to be in the $470-$540 million range.

While DoorDash isn't profitable yet, Wall Street expects that milestone to be reached this fiscal year. Consensus forecasts call for a GAAP profit of $0.01 per share in fiscal year 2024, with exponential growth to $1.44 per share projected for fiscal 2025.

On the conference call, co-founder and CEO Tony Xu highlighted that “increasingly, we're seeing customers coming to us for the first time actually for nonrestaurant use cases,” and called out retailers like Ulta Beauty (ULTA) and Lowe's (LOW) as examples of partners within its new verticals that are drawing new users to the platform.

DASH Wins Over Another Bull

Analysts are increasingly upbeat on DASH stock, which has a consensus “Moderate Buy” rating on Wall Street - now carried by 21 “Strong Buy” ratings, up from 17 a few months ago.

Last week, BTIG analyst, Jake Fuller upgraded the stock from “Neutral” to “Buy,” citing the name as a rare growth opportunity. According to Fuller, rideshare delivery is a "scarce pocket of secular growth in consumer-facing Internet," as various other online niches (think travel, dating, and real estate) look far more mature in comparison. The analyst added that positive EBIT and net income are expected later this year.

DASH is trading very close to its mean price target of $143.03, while Fuller's $155 target implies expected upside of 11.1%. 

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On the date of publication, Ruchi Gupta did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.