DoorDash Rockets Higher On Transformative Deal
There have been massive amounts of insider selling of DoorDash (NYSE: DASH) stock over the past 12 months but it has proven to be no hurdle for share prices. Despite broad-based selling among insiders and large shareholders, the stock is up by double-digits on what the market views as transformative news. The company reported the acquisition of Finnish start-up Wolt giving it an in-road into another adjacent growth market. The move, in addition to solid Q3 results, also sparked a round of analysts upgrades that we see pushing the stock even higher.
In regards to insider selling, Insidertrades.com reveals that company execs, board members, and large shareholders have made 60 sales and no purchases over the last 12 months. Total selling is worth roughly $5.5 billion dollars and about 8% of the company’s market cap before the Q3 news was released. This might be a worry if not for several factors that include shares trading at significantly high valuations and no singularly noticeable exodus that can be tied to any news. If anything, insides have sold themselves short and may have netted better results if they’d waited. As it is, insiders and large shareholders control more than 15.5% of the stock with institutional money holding roughly 50% of shares.
Mixed Results And Positive Outlook Lift DoorDash Shares
DoorDash had a great third quarter with revenue rising 44.5% to $1.27 billion dollars. This beats the consensus by 760 basis points and is driven by a 47% increase in orders and a 44.4 increase in Marketplace sales. The only bad news is that GAAP margins were impacted negatively leaving the EBITDA as expected and GAAP earnings slightly below the consensus. The mitigating factor is, of course, the unexpected acquisition of Wolt and its impact on the outlook.
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The Wolt deal is worth $8.1 billion in stock to DoorDash and brings a lot to the table. Wolt currently employs over 4,000 people and has operations in 23 countries opening the door to a significant growth opportunity. According to Brian Fitzgerald at Wells Fargo, "DASH picked the right partner, given Wolt's focus on execution/efficiency, scrappy culture, strong retention and frequency.”
The Analysts Raise Their Targets On DoorDash
The analyst’s rate DoorDash a buy, barely, with 12 of the 24 ratings a buy and the other 12 neutrals or hold. The Q3 report sparked some activity but it too is mixed with 2 of the 4 new notes reiterating their stance (1 hold and 1 buy), 1 upgrading to Outperform and 1 downgrading to Hold. The takeaway is that the consensus price target has been creeping higher and 3 of the 4 new notes included a higher price target. The consensus of these 4 is close to $250 compared to the $205 consensus estimate which assumes about 7% of downside for the stock and the high price target of $270.
The Technical Outlook: DoorDash Moves To Top Of Range
Shares of DoorDash are up more than 15% in premarket trading and may move higher. The caveat is that price action is at the top of the post-IPO trading range where resistance may be strong. If price action can get above the $225 level we would be more confidently bullish and bring a price target of $270 into play. If price action can’t get above this level it may remain range-bound until the Wolt deal progresses a little further.
Experience
Thomas Hughes has been a contributing writer for InsiderTrades.com since 2019.
Areas of Expertise
Technical analysis, the S&P 500; retail, consumer, consumer staples, dividends, high-yield, small caps, technology, economic data, oil, cryptocurrencies
Education
Associate of Arts in Culinary Technology
Past Experience
Market watcher, trader and investor for numerous websites. Founded Passive Market Intelligence LLC to provide market research insights.
