DoorDash Inc. Receives Buy Rating Despite Pricing Structure Adjustments and New York Minimum Wage Increase

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On Tuesday, Needham & Company maintained a Buy rating and $133.00 price target on DoorDash Inc. (NASDAQ:NASDAQ:), despite recent adjustments to its New York City pricing structure. The changes were implemented in response to the city’s minimum wage increase for delivery workers and an increase in minimum service fees that began in mid-January.

DoorDash introduced response fees to New York City regulations and reportedly increased fees for restaurants in the city, while placing a focus on tipping. These measures come as the company faces a $40 million increase in quarterly costs due to the minimum wage increase that took effect in December.

“While there are many assumptions in our analysis, our calculations suggest that DASH can offset the minimum wage increase without an increase in consumer spending due to the effective shift from tipping to a service fee,” they said. Needham analysts.

The company’s confidence in DoorDash is further underscored by its inclusion on the Needham Conviction List. Needham expects DoorDash to exceed consensus estimates for both 2024 and 2025. This optimism is based on the belief that concerns about incremental margins, including the effects of New York’s minimum wage increase and additional investments in the market total addressable (TAM), are exaggerated.

According to the firm, DoorDash is well positioned to manage the impact of higher labor costs while continuing to grow and potentially exceed market expectations in the years to come.

Perspectives InvestingPro

In light of Needham & Company’s continued Buy rating for DoorDash Inc. (NASDAQ: DASH), InvestingPro offers additional insights that may be of interest to investors. With a market capitalization of $43.84 billion and notable revenue growth of 34.38% over the trailing twelve months as of Q3 2023, DoorDash demonstrates a strong ability to grow its top-tier earnings.

InvestingPro’s guidance reveals that DoorDash holds more cash than debt on its balance sheet, giving it a level of financial stability and flexibility. Additionally, despite recent stock price volatility, DoorDash has performed strongly over the past year, with an impressive total return of 81.17%. This aligns with Needham’s positive outlook on the company’s ability to manage rising labor costs in New York and continue its growth trajectory.

However, it is important to note that DoorDash is trading at a high revenue valuation multiple with a Price to Book ratio of 6.67 as of Q3 2023, indicating that the stock price could be bullish in terms of book value. Additionally, the company has not been profitable over the last twelve months, resulting in a negative P/E ratio of -41.09. This might be something to consider for investors looking at the company’s current earnings relative to the stock price.

For those interested in digging deeper into DoorDash’s financial health and future prospects, InvestingPro offers a series of additional tips. Currently, there are 15 other InvestingPro tips available, which can provide a comprehensive understanding of the company’s potential. Use coupon code SFY24 to get an extra 10% off a 2-year subscription to InvestingPro+, or SFY241 to get an extra 10% off a 1-year subscription to InvestingPro+, in order to access these perspectives and make informed investment decisions.