DoorDash Stock Is Slumping. An Analyst Downgrade Cited Valuation.

DoorDash stock has soared more than 40% so far this year. (Yuki Iwamura/Bloomberg)

DoorDash stock tumbled Tuesday after Jefferies downgraded shares of the deliverer of food and groceries on valuation concerns.

A team of analysts led by John Colantuoni lowered their rating for DoorDash stock to Hold from Buy, but raised their price target to $250 from $235. The analyst raised their estimates for earnings before interest, taxes, depreciation, and amortization.

“With the stock up 45% YTD and valuation at a 120% premium to Internet [sector], we downgrade to Hold given DASH’s strong execution and growth algorithm appear fully reflected,” the analysts wrote.

DoorDash didn’t immediately respond to a request for comment about the downgrade.

Shares of DoorDash dropped 2.5% to $236.77, its lowest closing price since June 23. The S&P 500 index fell 0.4%.

Analysts also expect that DoorDash’s recent emphasis on affordability initiatives could affect the company’s revenue growth. DoorDash has offered more promotions and discounts to customers, and reduced fees for customers not enrolled in DashPass, a subscription service that offers discounts.

Affordability measures attract customers, but it might mean that DoorDash earns less profit from each order, the analysts wrote. Making ordering cheaper for customers means the company receives a smaller cut from each order, which would cap how much their revenue can grow, even if order volume increases.

Despite this, analysts see growth outside the U.S. for DoorDash, which operates in more than 30 countries.

“DASH’s exposure to a large addressable market and history of share gains should support growth in the U.S. restaurant delivery, which we see supplemented by faster growth in international restaurant delivery and new verticals,” the analysts wrote.

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