A recent breather for highflying shares of DoorDash has created an attractive entry point, according to an upgrade report from analysts at Morgan Stanley. DoorDash stock jumped Thursday after the upgrade.
In a client note, Morgan Stanley upgraded its view of DoorDash stock to a positive overweight rating, from a neutral equal-weight. The team of analysts led by Brian Nowak also set a 145 price target for DASH shares, up from 135.
DoorDash's "micro-level execution (growth and profitability) within its highly-competitive verticals is what drives us to overweight," Nowak wrote to clients.
Nowak added that DoorDash "continues to deliver peer-leading and better-than-expected consumer spend and gross order value results across its expanding platform."
On the stock market today, DoorDash stock rose more than 5% to close at 121.41.
DoorDash Stock Down After Earnings
The upgrade comes a week after DoorDash reported fourth-quarter results that sparked a sell-off. DoorDash revenue of $2.3 billion topped Wall Street's estimates but the company posted a wider-than-expected loss of 39 cents per share.
DoorDash stock fell about 9% between its earnings report last week and the close of trading Wednesday. The pullback has created an "attractive entry point," Nowak wrote.
The Morgan Stanley analysts are confident that DoorDash can boost its gross order value, or GOV, by 16% or more annually over the next three year. That view is supported by "improving user loyalty and category expansion," they said.
Another metric to watch: Morgan Stanley projected DoorDash will grow its adjusted EBITDA 40% annually through 2026, just ahead of the projected rate for rival Uber. EBITDA refers to earnings before interest, taxes, depreciation, and amortization.
Further, Morgan Stanley projects DoorDash could be profitable in 2024 for the first time, on the basis of generally acceptable accounting principles. That could provide a further boost for DASH stock.
DoorDash's Technical Ratings
Despite its slump post-earnings, DoorDash has gained 22% this year as of Thursday. Shares are up 108% over the past 12 months.
Further, DoorDash stock had an IBD Composite Rating of 91 out of 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating. The best performing stocks typically score above 90.
