The stock of food delivery startup DoorDash (Dash Stock) was trading down on Friday after an analyst at RBC Capital Markets downgraded it. The analyst cited worries about the business’s performance compared to its competitors, notably Uber Technologies.
DoorDash (DoorDash Inc) was downgraded to Sector Perform from Outperform by RBC analyst Brad Erickson, who also decreased his price estimate for the stock for the next 12 months from $70 to $60. He stated his belief that the competitive gap between DoorDash and Uber (UBER) was “narrowing” in a research note he authored.
“Based on our most recent restaurant checks in Manhattan, which utilize our in-house developed indexed ranking algorithm, we discovered a substantial… improvement by Uber in comparison to Grubhub and DoorDash in terms of relative order numbers, whereas DoorDash’s performance modestly declined… and maintains its position as the third largest participant in the United States’ most competitive delivery industry,” Erickson stated.
As Erickson sees restaurant orders in the U.S. marketplace continue to decline, he is “uncomfortable with a possibly unfavorable risk/reward given expected sensitivities to order deceleration,” he said.
DoorDash directed Barron to another passage from the analyst’s research report in response to the publication’s request for comment.
“We’re careful not to over-extrapolate here as DoorDash’s nationwide market share remains materially ahead of Uber’s,” Erickson said. “But the relative performance suggests improving execution which feels incremental.” DoorDash’s market share in the United States is still significantly higher than Uber’s.
On Friday, the price of a share of DoorDash (Dash Stock) fell by 2.6%, reaching $55.66. The price of the stock has dropped by 62% this year.
Two days before Erickson’s rating, DoorDash revealed that it is by cutting off approximately 1,250 people. The company’s management stated they were “not as diligent as we should have been in managing our team expansion.”
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