DoorDash (DASH) has become a major player in the food delivery market, but recent news adds new tailwinds and threats. Indeed, investors are watching closely as the company tests out autonomous drone delivery, expands in Europe through its planned takeover of Deliveroo, and faces rising costs in U.S. urban markets. As a result, these factors could drive its stock higher, or create bumps if expectations aren’t met.
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Catalysts That May Push the Stock Higher
One of the most exciting developments for DoorDash is its move into drone delivery. In fact, the company recently leased a warehouse in San Francisco to test out its autonomous drone deliveries. If successful, this could reduce delivery times, lower costs, and give DoorDash a competitive edge. Another potential catalyst comes from Europe, where DoorDash won the EU’s approval for its $3.9 billion acquisition of Deliveroo. Unsurprisingly, that would help increase its footprint and revenue outside of North America.
DoorDash could also benefit from regulatory shifts. For example, while competitors like Instacart (CART) may soon be forced to pay a minimum wage in New York City, which could add $65 million in costs for the firm, DoorDash already pays a minimum wage for grocery orders in the city. Therefore, this could put pressure on its competitors without really impacting DoorDash itself.
Risks to Watch Out For
That said, there are several risks that could hold DoorDash back. Rising labor and regulatory costs are among the biggest. In cities like New York, if the minimum wage increases for delivery and grocery services, it could eat into margins. Furthermore, if DoorDash is forced to significantly raise how much it pays across multiple regions, then the cost structure would become worse, especially in lower-margin segments.
Another risk is execution. While moving into drone delivery may sound promising, building reliable and regulatory-compliant operations is hard and expensive. Delays, technical issues, or regulatory pushback could slow down its progress. Also, expanding in Europe via Deliveroo looks good on paper, but integrating operations across different countries is difficult. As a result, if cost synergies don’t materialize, or if local market differences are underestimated, returns may fall short of expectations.
Is DASH Stock a Good Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on DASH stock based on 21 Buys, eight Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average DASH price target of $304.15 per share implies 17.9% upside potential.
