DoorDash shares inch higher after RBC upgrades rating of delivery service
Investing.com -- Shares in DoorDash (NASDAQ:DASH) ticked higher in premarket U.S. trading on Monday after analysts at RBC Capital Markets raised their rating of the delivery service.
San Francisco-based DoorDash flagged in February that its total costs and expenses had jumped by 9.3% in the fourth quarter following a move to expand the reach of the platform into areas like grocery and alcohol. The drive helped fuel a 23% rise in December quarter total orders and a better-than-anticipated 26.7% climb in revenue to $2.30 billion.
In a note to clients improving their outlook for the company to «Outperform» from «Sector Perform», the RBC analysts said they believe that the drive to grow its niche offerings — as well as its international presence — could help stabilize DoorDash's profits.
«We're increasingly convinced the New Verticals and International part of the business either has already reached or is close to reaching peak losses,» the RBC analysts said. "[W]e estimate around the $1.3 billion range annually."
They added that while macroeconomic concerns and a slowdown in consumer spending remain the biggest risk to DoorDash's top-line performance, there is still «significant runway» for core order growth.
Meanwhile, the analysts also argued that a merger between DoorDash and ride-hailing firm Lyft (NASDAQ:LYFT) makes «enormous sense,» particularly as Lyft becomes more competitive with larger rival Uber (NYSE:UBER). They estimated that such a partnership could potentially lead to mid-single digit to mid-teens growth in incremental orders.
Shares in Lyft, which the RBC analysts also upgraded to «Outperform,» surged by more than 7% prior to the opening bell in New York.
Read more on investing.com
