DoorDash (NASDAQ:DASH) recently announced a $1.2 billion acquisition of SevenRooms. It is a hospitality software company and will let DoorDash expand outside of the delivery sector. It will become a full-service commerce platform for restaurants and hospitality businesses.
This company has turned into a household name due to its strong growth in the food delivery sector, but competition is now too fierce and is hurting its margins. By acquiring SevenRooms, DoorDash aims to offer restaurants a suite of tools to drive more in-store sales and boost profitability. In turn, DoorDash could have a higher-margin arm to rely on.
The company also reported solid Q1 2025 results. So, should you buy the stock now?
This acquisition fundamentally changes DoorDash's value proposition to merchants. Instead of simply connecting restaurants with delivery customers, DoorDash can now sell to businesses directly and offset any margin declines on the delivery front.
"We're enhancing the DoorDash Commerce Platform to help merchants serve their customers across all channels," said Parisa Sadrzadeh, VP of Strategy and Operations at DoorDash. “With SevenRooms, we’re excited to give local businesses around the globe new ways to bring more guests in the door, build and grow direct relationships with their customers, access best-in-class CRM and drive profitability through smarter marketing.”
On the same day as the SevenRooms announcement, DoorDash posted plans to acquire UK-based Deliveroo for $3.9 billion. This will add nine new countries to its operations: Belgium, France, Italy, Ireland, Kuwait, Qatar, Singapore, the United Arab Emirates, and the U.K.
The combined company will operate in more than 40 countries with access to over one billion potential customers. DoorDash CEO Tony Xu said: "The enlarged group will bring together DoorDash's strong operating playbook with Deliveroo's local expertise to invest in innovation and execution at an even higher level. Together, we will work to deliver the best experience for all of our stakeholders, to grow the GDP of cities around the world, and to build the leading global platform for local commerce."
The growth potential is definitely much better with both of these acquisitions, and it will also add ballast to the company.
DoorDash has made its value proposition much better, the market has been quick to price that in. You are currently paying 235 times trailing earnings and almost 39 times forward earnings.
It reported its first positive annual net income at $123 million last year, and the growth forward looks quite strong. If the broader economy remains strong and there’s no recession, DASH stock is definitely a buy.
If Wall Street holds up the current earnings premium, it could be around $250 by the start of 2027.
Unfortunately, the economy is currently slowing down, and so is the top and bottom line for DoorDash. EPS growth and sales growth are expected to visibly slow down, and it seems unlikely that Wall Street will continue to pay 39 times forward earnings for this stock.
There are other stocks in the market trading at much cheaper valuations and better upside potential, so I’d tag DASH stock as a “Hold.”
