- DoorDash (HYPHEN) boldly invests in a hospitality tech start-up.
- This should, in the long term, help the company develop its business model and revenues.
- Investors should take advantage of this opportunity to hold DASH shares before they revert to $200.
Source: various photographs / Shutterstock.com
food delivery company DoorDash (NYSE:HYPHEN) became a buzz-worthy business on Wall Street during the onset of the Covid-19 pandemic. DASH stock is a solid buy today and has the potential to even double its price.
Two years after Covid-19 hit the United States, some skeptics might wonder if DoorDash can adapt to changing circumstances. After all, more and more people feel comfortable eating out these days. So home food delivery might no longer be seen as a hot market like it once was.
It may have been this concern that drove DoorDash’s stock price down from its 2021 high. Yet, as we’ll see, the company is still showing robust revenue growth — and in addition, a technology-driven acquisition should help DoorDash attract a new class of customers.
What’s going on with DASH Stock?
DASH stock may have been a market darling in 2021, when it traded at $200 or even higher than that. Lately, however, the stock has struggled to stay above $100.
Could the stock price double from here and cross the $200 mark once and for all? There are certainly reasons to think so.
Through the collaboration, DoorDash will provide what it describes as “Express Grocery Delivery, a new service that gives consumers faster, more convenient delivery of fresh groceries in less than 30 minutes.”
This will be available to consumers in more than 20 major US cities, including Los Angeles, Denver, and Seattle. From dairy and dairy products to snacks and even frozen foods, DoorDash customers will have access to over 6,000 items for grocery delivery.
Albertsons’ partnership should help bolster DoorDash’s revenue – which is already growing rapidly, by the way. In effect, unaudited results indicate that DoorDash increased its revenue from $970 million in the fourth quarter of 2020 to $1.3 billion in the fourth quarter of 2021, and from $2.9 billion in 2020 to $4.9 billion in 2021 .
DoorDash is urgently looking for merchants
Many people probably think of DoorDash as a company that caters to individuals and families. The partnership with Albertsons could reinforce this point of view, to a certain extent.
Yet the company’s business model is not limited to door-to-door food delivery. At this point, DoorDash has agreed to acquire a hospitality tech startup called Bbot.
Rather than focusing on customers themselves, this collaboration “will support the evolving needs of restaurateurs and other food service operators”.
In other words, DoorDash is targeting merchants with this acquisition. In particular, on the Bbot websiteit now says “Bbot powered by DoorDash”.
It also bills itself as “powerful digital ordering for your restaurant,” as the Bbot app deploys a simple and intuitive platform to facilitate digital in-store orders and payments, among other tasks.
Additionally, Bbot promises a range of benefits (according to DoorDash), as it “enables merchants to increase sales while creating higher quality experiences for customers and staff”, while providing “the ability to ‘use all of their tables and extend their hours even in the face of understaffing.
Bbot’s platform is a perfect fit for DoorDash, and it’s actually surprising that this type of transaction hasn’t happened sooner. Over time, this acquisition could provide a major boost to DoorDash’s top line and bottom line.
What you can do now with DASH Stock
The Albertsons partnership reinforces that DoorDash is still a strong competitor in the home food delivery market. At the same time, the Bbot takeover indicates that DoorDash’s target market extends beyond individual consumers.
Plus, its revenue growth is quite impressive. In light of these considerations, DASH stock has the potential to return to $200 and is therefore worth holding now.
As of the date of publication, David Moadel had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.
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