Street Starts Coverage of Olo (OLO) With Mostly Positive Ratings on Profitable Business Model

April 12, 2021 10:31 AM EDT
Get Alerts OLO Hot Sheet
Price: $28.83 +7.82%

Rating Summary:
    5 Buy, 2 Hold, 0 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 38 | Down: 18 | New: 7
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Numerous Wall Street firms initiated coverage of recent IPO Olo (NYSE: OLO) Monday, with ratings mostly leaning positive. JPMorgan, Piper Sandler, RBC, Truist Securities, and William Blair are some houses that have started the coverage on the restaurant software company with a "Buy" or equivalent rating.

On the other hand, Stifel and Goldman Sachs started coverage with a "Neutral" or equivalent rating.

In March, shares of Olo soared almost 40% on the market debut as investors rushed to invest in a company that has exposure to both the tech sector and the growing food-delivery industry. However, the stock fell sharply two weeks ago when its largest customer, DoorDash (NYSE: DASH), accused the company of defrauding it for years.

“Olo has overcharged DoorDash — inflating its own revenues by collecting from DoorDash tens of millions of dollars more than what DoorDash should have paid,” it is said in a filling.

Brent Bracelin, a senior research analyst at Piper, notes that OLO has bold ambitions to digitize the trillion-dollar food industry. He started with an "Overweight" rating and a price target of $35.00 per share.

"From humble roots as a mobile ordering concept founded back in 2005, the global pandemic has accelerated the standardization of digital technologies that contributed to 200% higher digital volumes processed through the Olo digital ordering engine in 2020 with platform revenue accelerating to 106% y/y. That said, platform growth pre COVID was still robust at 52% y/y. Today, the Olo platform has broad reach across 64K+ restaurant locations as 400+ brands like Denny's, Chili's, and Subway have chosen Olo as a digital standard to provide consistent customer experiences across all market locations," the analyst wrote in a note sent to clients.

On the other hand, Stifel analyst Brad Reback is less bullish on OLO stock amid a high valuation but he believes the company offers compelling long-term opportunities.

"Olo is the leading provider of online ordering systems for national and regional restaurant chains counts over 400 brands and 64,000 total restaurants as customers. Although COVID has served as a sizable tailwind to online ordering over the last year, the shift of consumers towards eating a greater percentage of their meals from restaurants has been ongoing for years and continues to account for the majority of industry growth. We believe the company provides the most comprehensive online ordering solution for enterprise-scale restaurants and provides the ability for these organizations to maintain richer customer experiences than made possible by the offerings from aggregators and consumer marketplaces," he said in a memo.

Reback's price target on the Hold-rated stock is $27.00 per share, which is slightly below the current market price of $27.96.

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