MoffettNathanson sees upside for DoorDash and Uber, Lyft on the 'losing end'

MoffettNathanson analyst Michael Morton initiated coverage of DoorDash (NYSE: DASH) at Outperform with a $79 price target and Uber (NYSE: UBER) at Outperform with a $47 price target in a note Monday, adding that Lyft (NASDAQ: LYFT) stays at Market Perform with a $15 price target.

Morton told investors that for the gig economy, after a decade of growth at all costs, the bumpiest parts of the ride are in the rearview mirror.

"We are sober in our assessment of the challenging past but encouraged by addressable markets, consumers' willingness to spend, and improving underlying unit economics on the core businesses of U.S. Restaurant Delivery and Rideshare. Management teams are now incentivized, by boards and investors, for profitability. We expect DoorDash and Uber to beat consensus," said Morton.

For DoorDash, the analyst explained that the firm's long-term thesis is supported by its outlook on unit economics in the core restaurant business.

"Adj. EBITDA per restaurant order improve from -$0.72 in 1Q20, to $0.48 in 3Q22, and we see it heading to $1.09 in 4Q24. We forecast $1.3 billion Adj. EBITDA earnings power for the core restaurant business in 2024," states Morton.

For Uber, he says they have less conviction than with DoorDash, but see more potential upside.

"Uber's complex global operations focus investors on consolidated bookings and Adj. EBITDA. We expect light bookings and Adj. EBITDA beats driven by a majority of management's incentive structure focused on Adj. EBITDA," the analyst writes.

However, he believes that Lyft is on the losing end of Uber's mobility and delivery network effect.

"Lyft's diseconomies of scale on insurance, marketing, and driver supply make for a challenging outlook. In a world of increasing focus on profitability, Lyft doesn't deliver," argues Morton.

By Sam Boughedda

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