What DoorDash’s 24% Drop Means for Investors After New Grocery Delivery

• Wondering whether DoorDash stock is really worth the price tag it has today? You are not alone, especially with so much recent buzz around the company’s growth and valuation.

• Shares have lifted an impressive 21.3% year-to-date and 22.2% over the past year. However, the past month has seen a sharp dip of 24.1%.

• Much of this volatility has been driven by news of DoorDash expanding its grocery delivery partnerships, as well as new features like express delivery aimed at boosting order frequency. These headlines have investors weighing whether the long-term growth opportunity is getting bigger or if optimism has run ahead of reality.

• At a glance, DoorDash scores a 3/6 on our valuation checks, signaling it is undervalued in half of the key metrics we track. However, there is more than one way to estimate a company’s true worth. Let’s dig into the approaches investors use to value stocks like DoorDash, and why understanding these methods may be only the start of the story.

DoorDash delivered 22.2% returns over the last year. See how this stacks up to the rest of the Hospitality industry.

The Discounted Cash Flow (DCF) model is a method that estimates the value of a company by projecting its future cash flows and discounting them back to today’s value. This approach aims to determine what a business is really worth based on its ability to generate cash in the future.

For DoorDash, the model uses a 2 Stage Free Cash Flow to Equity methodology. Currently, the company reports Free Cash Flow (FCF) of $2.04 billion. Analysts supply cash flow estimates out to 2029, projecting FCF of $6.25 billion by then. Beyond these analyst forecasts, further annual projections up to 2035 are extrapolated using industry estimates. All values are given in US dollars.

Based on these projections, the resulting intrinsic value for DoorDash is $309.63 per share. Compared to where the stock is currently trading, this DCF-based valuation suggests the stock is 33.2% undervalued relative to its estimated fair value.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests DoorDash is undervalued by 33.2%. Track this in your watchlist or portfolio, or discover 879 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for DoorDash.

The price-to-earnings (PE) ratio is a popular way to value profitable companies because it directly compares a company’s current share price to its per-share earnings. For businesses like DoorDash that generate positive earnings, the PE ratio distills investor expectations about future growth and profitability into a single, easy-to-read figure.

A fair PE ratio for any stock is influenced by how fast investors think the company will grow compared to its risks and industry peers. Generally, higher expected growth and lower risk justify a higher PE multiple….