After being hit with a downgrade Friday from analysts at one firm, DoorDash Inc. over the weekend got an upgrade from analysts at another, who cited the delivery app’s size along with “resilient” consumer spending.
The upgrade, to a buy rating from neutral, came from Mizuho analysts in a note dated Sunday. Those analysts also raised their price target to $105 from $90.
Shares of DoorDash
DASH,
were up 2.4% in early afternoon trading.
“We believe key drivers include continued market share gains from its category-leading position in the U.S., and rational competition in Europe,” the Mizuho analysts said. “In conjunction, moderated food inflation and resilient consumer spending provide incremental support to our view.”
On Friday, analysts at MoffettNathanson downgraded DoorDash, saying that the return of student-loan payments would weigh on demand for food delivery, which they called an “affordable luxury” for customers. The diverging takes on DoorDash come as the company tries to expand its delivery services from restaurants to other areas of retail, and as Wall Street tries to suss out consumer priorities as oil and gas prices remain high and drive up overall inflation figures.
The Mizuho analysts, in their note, also said that “increased labor supply” had made it easier for the company to keep costs in check. And they said DoorDash had room to invest in expansion.
“Furthermore, we believe [DoorDash] has the flexibility of investing in new categories,” the analysts said.
“The company disclosed that it re-invested 30% of contribution profits from the U.S. restaurant business in [the third quarter of 2022], and we estimate the investment level to be stable as of last quarter,” they continued. “With that in mind, we expect any move toward rationalization would allow further flow directly to the bottom line.”
Shares of DoorDash are up 72% so far this year. By comparison, the S&P 500 Index
SPX
has risen 16.7% over that period.
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