DoorDash is the IBD Stock of the Day for Thursday. Shares of the food delivery firm are moving off support at their 21-day moving average and trading tightly following a big rally.
On the stock market today, DoorDash stock rose 1.3% to close at 243.69. DoorDash stock broke out above a double-bottom base buy point of 201.03 and has rallied more than 20% since then, reaching a 52-week high of 248.74 on July 1. After a slight pullback, DoorDash stock is moving off its 21-day line in Thursday's action. DASH stock also has a four-weeks-tight pattern with 248.74 as the buy point.
Investors could have used Thursday's move as a chance to take a buy position. The San Francisco-based company will report second quarter earnings on Aug. 6.
Meanwhile, DoorDash stock has rallied 45% this year and nearly 400% since the start of 2023.
Sales Growth A Key Driver For DoorDash
The company's gains has been helped by DoorDash's strong average quarterly revenue growth of 29% over the past three years, underscoring how consumers are prioritizing the convenience of delivery even amid uncertainty caused by inflation and, later, tariffs.
DoorDash's marketplace for restaurants captures just under two-thirds of U.S. food delivery sales, according to estimates from Earnest Analytics. Uber Technologies is a distant second. DoorDash's top-purchased items are french fries followed by chicken quesadillas, according to a 2023 blog post recapping a decade of orders.
The firm reported its first quarterly profit as a public company late last year and has steadily improved profits since then.
The strong results and recent stock action have powered DoorDash stock to inclusion in the IBD 50 list of top growth stocks. DoorDash is also the top ranked stock in the 59-stock Retail-Internet industry group tracked by IBD.
The group itself ranks 3rd best among 197 industry groups, based on six-month price performance.
DoorDash Earnings Preview
The strong rally for DoorDash stock will be put to the test early next month with the company's Q2 results.
Analysts expect DoorDash will post earnings of 44 cents per share for the June-ended quarter, according to FactSet. DoorDash lost 38 cents per share during the same period last year.
Meanwhile, sales are projected to increase 21% to $3.03 billion, according to FactSet analysts consensus.
Analysts are mostly bullish for DoorDash stock heading into the report. The stock has 29 buy calls among Wall Street analysts, according to FactSet, compared to 16 analysts who are neutral.
Morgan Stanley analyst Brain Nowak reiterated an overweight, or buy, view on DoorDash stock in a client note earlier this week. He upped his price target to 275 from 200.
"We see DASH's leading restaurant supply and courier network, large high frequency DashPass member base, and leading unit economics enabling it to continue to drive the U.S. online food delivery space," Nowak wrote.
Analysts with Jefferies downgraded DoorDash to neutral earlier this month, saying the company's rally had changed its valuation from "feast to fair value."
In a Q2 earnings preview note for clients last week, Jefferies analyst John Colantuoni is "positioned to deliver" on top-line estimates. But he said investors will likely be listening for more details on the strategy behind DoorDash's acquisitions of U.K. delivery-firm Deliveroo and hospitality software firm SevenRooms.
DoorDash announced the $3.9 billion Deliveroo deal and $1.2 billion SevenRooms acquisition just before publishing its first-quarter results in May. In general, DoorDash has been looking to expand its international presence and moving into markets beyond restaurant-based delivery.
DoorDash Stock: Technical Ratings
DoorDash stock holds a best-possible IBD Composite Rating of 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one.
DoorDash's relative strength line is down a tick from a month ago but remains a strong 94 out of 99.
DoorDash has a 21-day average true range of 2.7%. The ATR metric, available on IBD's MarketSurge charting tool, gauges the characteristic breadth of a stock's behavior. Stocks that tend to make large jumps or dives in daily stock market action, the kind that can trigger sell rules and shake investors out of a stock, have a high ATR. Stocks that tend to make more incremental moves, below 8%, have lower ATRs.
