Weighing DoorDash After New Expansion Moves and a 25% Drop in Share Price

• If you have ever wondered whether DoorDash stock is worth its price tag, you are not alone. Understanding what drives its current valuation is key before taking the plunge.
• The stock has seen some wild swings lately, climbing 4.6% this week but still down 25.4% over the past month. However, it remains up 16.2% so far this year and 259.4% over three years.
• Recent headlines have spotlighted DoorDash's strategic moves, including expansion into new markets and partnerships with major retailers. These developments have fueled both excitement and debate, helping to explain the company's volatile share price as investors react to the evolving business landscape surrounding food delivery.
• According to our checks, DoorDash currently scores 3 out of 6 for relative undervaluation. Up next, we will break down the good, the bad, and the better ways to judge whether DoorDash is truly a buy, saving the most powerful approach for last.

DoorDash delivered 9.9% returns over the last year. See how this stacks up to the rest of the Hospitality industry.

Approach 1: DoorDash Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company’s intrinsic value by projecting its future cash flows and discounting them back to today’s value. This approach helps investors gauge what a business is really worth based on its ability to generate cash over time.

DoorDash’s current Free Cash Flow stands at $2.0 billion. Analysts project that annual cash flows will increase steadily, with Simply Wall St extrapolating growth beyond the next five years. By 2029, Free Cash Flow is expected to reach approximately $6.2 billion, with longer-term forecasts suggesting continued robust growth.

This DCF analysis, using a 2 Stage Free Cash Flow to Equity model, calculates DoorDash’s estimated intrinsic value at $308.84 per share. This suggests the stock is currently trading at a 35.8% discount, and the model indicates that DoorDash stock appears to be undervalued relative to its future cash generation potential.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests DoorDash is undervalued by 35.8%. Track this in your watchlist or portfolio, or discover 920 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for DoorDash.

Approach 2: DoorDash Price vs Earnings

The Price-to-Earnings (PE) ratio is an effective metric for valuing profitable companies like DoorDash, as it measures how much investors are willing to pay today for a dollar of the company's earnings. For companies generating positive net income, the PE ratio often reflects both the market’s growth expectations and the perceived risks in future performance. Generally, higher growth rates and lower risks justify higher PE ratios. More uncertainty or slower growth can lead to lower "normal" or "fair" PE multiples.

Currently, DoorDash trades at a PE ratio of 99.1x, which is significantly higher than the Hospitality industry average of 21.3x and the average for its peers at 34.5x. At first glance, this premium might raise eyebrows. However, headline comparisons can sometimes miss the unique strengths or risks of individual companies.

This is where Simply Wall St’s proprietary Fair Ratio is relevant. The Fair Ratio, calculated at 46.8x for DoorDash, is specifically designed to reflect expectations around growth, profitability, market cap, and risk factors tailored to the company rather than relying only on peer or industry averages. By considering a fuller financial picture, the Fair Ratio offers a more nuanced benchmark for a company’s true value.

Comparing DoorDash’s current PE ratio (99.1x) with its Fair Ratio (46.8x) suggests the stock is trading at a substantial premium relative to what would be considered fair value under these metrics.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1443 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your DoorDash Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is simply the story or perspective that you, as an investor, attach to a company's future, connecting what you believe about DoorDash's growth, margins, and risks to your own financial forecasts and Fair Value estimates, rather than relying only on historical data or analyst averages.

Narratives are powerful because they link a company's story, such as expected expansion into new markets, innovation in AI, or evolving customer behavior, directly to dynamic financial models and a Fair Value figure. This transforms abstract forecasts into actionable, personalized investment signals, letting you decide if the current price offers a good opportunity based on your outlook, not just consensus.

On Simply Wall St's Community page, millions of investors are already using Narratives to compare their Fair Value to today's price, helping them decide whether to buy or sell. Narratives update automatically as new information like earnings or news comes in, keeping your analysis fresh and relevant.

For instance, one Narrative for DoorDash assumes ambitious international growth and aggressive profit margin expansion, leading to a Fair Value estimate of $360, while a more cautious Narrative factoring in rising costs and competitive threats values the company at just $205. This proves there is no "one-size-fits-all" answer and highlights how your perspective drives your valuation.

Do you think there's more to the story for DoorDash? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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