Bank of America Boosts DoorDash Target Amid Home Depot Deal
Bank of America Boosts DoorDash Target Amid Home Depot Deal
Recently, Bank of America made headlines by increasing its price target for DoorDash (NASDAQ: DASH) from $172 to $205. This revision comes as a direct result of DoorDash's exciting new partnership with Home Depot (NYSE: HD). The analysts at BofA are optimistic, highlighting the incredible growth potential this collaboration represents.
The Power of Partnership
The collaboration brings more than 2,000 Home Depot locations into the DoorDash ecosystem. This significant addition expands DoorDash's offerings beyond dining, now incorporating over 115,000 stores and 2 million different products available for delivery. Such growth in their service range not only enhances customer convenience but also positions DoorDash as a formidable competitor in the delivery sector.
Impressive Market Performance
BofA's analysis noted an impressive performance in the online restaurant industry, with the latest data indicating that consumer spending via credit and debit cards is increasing at a pace not seen since late 2021. In this thriving landscape, DoorDash has managed to outperform key competitors such as Uber (NYSE: UBER) and Instacart (NASDAQ: CART), showing an impressive 3% lead over Uber and nearly 20% over Instacart in the last quarter.
Future Projections
Looking ahead, analysts suggest significant growth in DoorDash's share of restaurant spending. It's projected that the penetration of third-party (3P) app usage in this sector could increase from 7% to 16%. Given DoorDash's current position and market strategies, it is expected to maintain its lead, reinforcing why BofA has reiterated a “Buy” rating on their stock.
Valuation Insights
The adjustment in price target reflects a detailed sum-of-the-parts valuation approach by BofA. The insights suggest a substantial boost in restaurant EBITDA and predicted growth in gross order value for new verticals. In projecting these factors, BofA applies an 18x multiple on the 2026 restaurant EBITDA, which is slightly higher than what peers might expect. For the new verticals, they evaluate it at a 1.0x gross order value multiple, justifying the upward adjustment to $205.
Conclusion: A Promising Future for DoorDash
The partnership with Home Depot and the overall positive market trends present a promising outlook for DoorDash. As they continue to innovate and expand their service offerings, investors may find opportunities for substantial growth in the near future.
Frequently Asked Questions
What was the reason for Bank of America's increase in DoorDash's price target?
Bank of America raised the price target due to DoorDash's partnership with Home Depot, highlighting significant growth potential.
How many Home Depot stores are included in the DoorDash partnership?
The partnership includes over 2,000 Home Depot stores being added to DoorDash's platform.
How does DoorDash's performance compare to its competitors?
DoorDash outperformed Uber and Instacart in recent quarters, showing growth rates of 3% and nearly 20%, respectively.
What is the projected growth for DoorDash in restaurant spending?
It is anticipated that 3P app penetration in restaurant spending could grow from 7% to 16% in the long term.
What multiple does Bank of America apply for New Verticals evaluation?
BofA applies a 1.0x gross order value multiple for the valuation of New Verticals.
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