DoorDash is the IBD Stock of the Day for Friday. Shares of the food and grocery delivery firm are chasing a cup-with-handle buy point and have steadily found support from investors at the 50-day exponential moving average.
On the stock market today, DoorDash stock gained a fraction to close at 262.47. DASH stock is ahead around 56% year to date and more than 80% from 12 months ago.
And DoorDash's shares have racked up a more than 400% gain since the start of 2023, as the company's strong sales growth and improved profitability eased investor concerns about the sustainability of on-demand food delivery.
Strong Q2 Results
The strength of U.S. food-delivery demand was on display when DoorDash reported earnings results in early August. Shares jumped 5% and touched a record high of 278.15 the day after the report.
DoorDash's revenue jumped 25% to $3.28 billion for the June-ended quarter, compared with analyst estimates of $3.16 billion. That's the money DoorDash collects in fees and other costs from the $24.2 billion in gross order value on its marketplace during the quarter, which marked a 23% increase from a year earlier. Revenue growth accelerated from the 21% rate that DoorDash posted in Q1.
Earnings swung to 65 cents per share for the quarter, compared with a loss of 38 cents per share a year ago. Analysts polled by FactSet were forecasting earnings per share of 44 cents for DoorDash.
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Grocery Debate Hits DoorDash Stock
But DoorDash stock pulled back from those gains. Shortly after the company's earnings report, Amazon announced a major expansion of its grocery delivery offering.
The tech giant's maneuvering weighed on shares of DoorDash, Instacart and Uber Technologies. Instacart is the leader in on-demand grocery delivery, while DoorDash and Uber have both invested in expanding partnerships with grocers.
DoorDash stock fell 4% Aug. 13, the day of the Amazon news. Shares closed the month 2% lower overall. That marked just the second month this year that DoorDash stock did not post a gain, the other coming in March.
Some analysts viewed concerns about Amazon's grocery push as overblown, at least for DoorDash stock.
"We will continue to monitor for evidence on Amazon's encroachment, but for now remain optimistic on the path forward — powered by core restaurant delivery but also expansion areas and normalized margin opportunity," Bernstein analyst Nikhil Devnani wrote to clients last month.
Impacted Less Than Rivals
DoorDash stock has taken far less of a blow than Instacart, which relies on grocery sales for the majority of its revenue. Instacart stock fell 10% in August and is down another 3% this month.
Of course, Amazon is not the only company battling for grocery sales. Uber expects to reach $12.5 billion in gross bookings from non-restaurant deliveries this year, according to a Bloomberg report Friday. The report noted that Uber had struck partnerships with some retailers previously only available on Instacart or DoorDash.
Meanwhile, Walmart is the overall market leader for online grocery sales.
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What's Next For DoorDash Stock?
DoorDash's third quarter ends with September, with the company typically reporting results in late October or early November. Analysts are projecting DoorDash's Q3 revenue will grow by about 24% to reach $3.35 billion while earnings increase 79% to 68 cents per share, according to FactSet.
Analysts are mostly bullish about DoorDash stock. The stock has 30 buy calls among Wall Street analysts, according to FactSet, compared to 13 analysts who are neutral and one who holds a sell rating.
Meanwhile, DoorDash stock has found support above its 21-day exponential moving average since the start of September. Shares are ahead 6.5% this month.
DoorDash's weekly chart on MarketSurge shows the stock in a second-stage cup base with a 278.15 buy point. Shares broke out from a double-bottom base buy point of 201.03 in early May. The low point of that base undercut a previous flat-base pattern from December and January, resetting DoorDash's base count on its weekly chart.
DoorDash's daily chart, meanwhile, shows a cup-with-handle base with an entry at 269.06.
DoorDash stock boasts a near-perfect 98 IBD Composite Rating, according to IBD Stock Checkup.
That score places DoorDash at the top the 59-stock Retail-Internet industry group tracked by IBD, which has performed well this year. The group ranks 21st among 197 industry groups, based on six-month price performance. The overall group is up 26.3% year to date.
DoorDash's Relative Strength rating is down from a month ago but remains a strong 89 out of 99.
