This Magnificent Stock Is Up 370% From Its 2022 Low -- 2 Reasons to Buy It Now, and 1 Reason to Steer Clear

DoorDash (NASDAQ: DASH) operates the most popular food delivery platform in the United States. Its stock has soared by 370% since it bottomed in 2022 during the S&P 500 (SNPINDEX: ^GSPC) bear market, as the company has drastically expanded its service offerings and its global footprint.

If DoorDash stock can gain another 22%, it will reclaim its all-time high, which was set during the tech frenzy in 2021. Can the recovery continue? Here are two reasons to buy shares, and one reason to act with caution.

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The first reason to buy DoorDash: record revenue

DoorDash generated a record $3 billion in revenue during the first quarter of 2025. That was a 21% increase from the year-ago period, and it was the first time the company crossed the $3 billion milestone.

DoorDash's revenue is climbing for a few reasons. First, the company's gross order value (GOV), which measures the dollar value of each customer order on the platform, continues to grow. It reached a record high of $23.1 billion during the first quarter, which was up 20% year over year.

Second, DoorDash's net revenue margin has been trending higher for the last few years. It came in at 13.1% during the quarter, which was just shy of its record high of 13.5%. Net revenue margin is the percentage of GOV which DoorDash gets to keep -- what's left over after the company pays restaurants, retailers, and drivers their share of each order. When the margin trends higher, it means DoorDash is squeezing more efficiency out of its logistics network, or raising its take rate (the fee it earns for completing each order).

DoorDash is also growing through acquisitions. The company just agreed to spend $3.8 billion to buy Deliveroo, one of the largest food and grocery delivery platforms in the United Kingdom. In the very same week, DoorDash announced that it would spend $1.2 billion to acquire SevenRooms, a software provider to the hospitality industry. Restaurants and hotels use it to improve their marketing, operations, and guest experience, so DoorDash thinks it will help its merchants serve their customers more effectively.

The recent acquisitions follow other blockbuster deals over the last few years. In 2022 DoorDash acquired Wolt, which was one of Europe's biggest food and grocery delivery companies at the time. It had a foothold in 23 countries, so it helped DoorDash accelerate its international expansion.

Nevertheless, DoorDash's revenue growth has steadily decelerated in recent quarters, primarily because management is spending less aggressively on operating costs so it can deliver higher profits. And this strategy appears to be working.

The second reason to buy DoorDash: surging profits

During the first quarter of 2025 DoorDash had almost $2.9 billion in operating costs, an 11.7% increase year over year. Since revenue grew at a much faster rate of 21%, more money flowed to the bottom line as profit. As a result, the company delivered $193 million in net income, a big positive swing from its $23 million net loss in the year-ago period.

In the past, DoorDash regularly grew its operating costs at a much faster rate even if it led to losses on the bottom line, because management's core focus was on customer acquisition in the very competitive food delivery space. But now DoorDash is the dominant platform in the U.S., with a market share of over 60%, and it has diversified into other verticals like groceries and retail products. So its competitive position is secure enough for management to shift its focus toward profitability.

Beyond the strong net income in Q1, the company has now delivered more than $2 billion in adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) over the last four quarters alone. This is a non-GAAP (adjusted) measure of profitability, which excludes one-off and noncash expenses like stock-based compensation. DoorDash prefers investors focus on this metric rather than net income, because it's a better indication of how much cash its business is actually generating.

Generally speaking, a highly profitable business is more sustainable over the long term. It also gives management greater flexibility to reinvest in growth initiatives like marketing, or research and development.

The reason to avoid DoorDash: valuation

If there is one reason to steer clear of DoorDash stock, valuation might be it. The company isn't consistently profitable enough on a GAAP (generally accepted accounting principles) basis to use the price-to-earnings (P/E) ratio. However, we can value its stock using the price-to-sales (P/S) ratio, which divides a company's market capitalization by its trailing-12-month revenue.

DoorDash currently trades at a P/S of 7.9, which is near its highest level in three years. That also makes it far more expensive than Uber Technologies (NYSE: UBER), which trades at a P/S of just 4.3.

DASH PS Ratio data by YCharts.

Though the Uber Eats food delivery platform is trailing DoorDash in the U.S., Uber also operates the largest ride-hailing network in the world, in addition to a growing commercial freight network. During the first quarter of 2025, Uber had $42.8 billion in gross bookings, which was almost double DoorDash's GOV figure. Moreover, Uber generated almost four times as much revenue, with its top line coming in at $11.5 billion during the quarter.

That means DoorDash probably shouldn't be trading at such a steep premium to Uber, since Uber is a significantly more diversified company and generates far more revenue. Plus, with autonomous vehicles slowly hitting the roads, I would argue that Uber has significantly more upside than DoorDash over the long term.

DoorDash might be a good buy if you can hold onto your shares for five years or more, which would give the company some time to grow into its valuation. But shorter-term investors might want to steer clear, because upside might be limited over the next 12 months or so.

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Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends DoorDash and Uber Technologies. The Motley Fool has a disclosure policy.