As the pause on pandemic-era student loan payments comes to an end, Wall Street analysts have tried to gauge the effects it might have on consumer spending. One area that could be hit harder than others, MoffettNathanson analysts said Friday, is online food delivery, which could mean bad news for food delivery app DoorDash.
Analysts downgraded shares of DoorDash Inc. DASH,
to their hold version of buy and lowered their price target from $110 to $93. DoorDash shares were down 3.2% in afternoon trading.
“Does Resumption of Loan Repayments Introduce Booking Risk for Food Delivery? analysts say. “We fear the answer is yes.”
Analysts made that assessment after pandemic lockdowns reshaped the restaurant industry and government relief left many diners — but certainly not all — with more money to spend. Economic upheaval has made food delivery an “affordable luxury,” they said.
Analysts praised DoorDash’s management team, saying the restaurant industry has consistently seen growth despite economic downturns and noting that shares of the online delivery service have recovered this year. But they said food delivery, which tends to cost customers much more than picking up orders themselves, is “one of the most discretionary behaviors of the average consumer”, making them more vulnerable than other areas of e-commerce.
Citing federal data, analysts said people ages 24 to 49 hold 69% of the nation’s student debt. Many people in this age group use delivery services like Uber Eats and DoorDash, analysts say.
“As a result, we believe future growth in food delivery bookings may come under pressure as consumers look to reduce spending in more discretionary areas,” the analysts said. “We do not believe the market currently reflects these risks. We expect this to also affect Uber Eats, but the business mix and international contribution to Uber’s consolidation minimizes the impact. »
Interest on student loans resumed on September 1, and payments are due in October. Those payments will resume as optimism grows that the economy can avoid a recession, but rising prices continue to strain consumers.
Still, DoorDash last month reported better-than-expected quarterly sales, helped by a surge in sales and the company’s expansion into businesses outside of restaurants, like grocery and retail. The company said at the time that it would continue to invest in new activities.
DoorDash shares are still up 66% so far this year. For comparison, the S&P 500 SPX is up 16.4% over this period.
In June, Jefferies analysts said Amazon.com Inc. AMZN,
Walmart Inc. WMT,
et Target Corp. TGT,
– all big e-commerce players – were the retailers most likely to feel the biggest impact from the resumption of student loan payments.
2023-09-17 23:32:03
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