DoorDash, Inc. (NASDAQ:DASH): Will the Crackdown on Illegal Immigration Stall the Dash?

We came across a bearish thesis on DoorDash, Inc. (NASDAQ:DASH) on ValueInvestorsClub by pcm983. In this article, we will summarize the bears’ thesis on DASH. The company’s shares were trading at $170.30 when this thesis was published, vs. the closing price of $195.84 on Feb 27.

Photo by Jon Tyson on Unsplash

DASH operates a commerce platform that connects merchants, consumers, and independent contractors in the United States and internationally. Through its DoorDash Marketplace and Wolt Marketplace, DASH provides various services like customer acquisition, demand generation and order fulfillment.

While DASH represents a successful Silicon Valley story, one of its key risks has been underplayed in more of the coverage it has received. The platform is highly reliant on migrant labor and a significant chunk of them have been operating illegally in the US. These employees pose a serious threat as they have access to the personal information of US citizens. The minimal verification allows these dashers to operate with fake names and registration numbers. With the Trump administration cracking down on illegal immigrants, it is only a matter of time before DASH is held accountable for the burgeoning count of such employees. The fines for non-compliance can range from $100-$1,000.

Even if DASH manages to bypass these fines, a stop in the influx of migrants will pose serious challenges to the growth of business. Margins will also be hurt as accessibility to low-cost workforce will be limited. US Senators like Marsha Blackburn, Mike Braun, and Ted Budd have already asked for explanations from Uber Eats, DoorDash and Grubhub. The Trump administration will also be aggressive in implementing immigration laws, especially in urban regions.

DASH currently trades at ~27x its 2025 EBITDA estimates which is a very generous multiple given the impending risk. Even if the EBITDA for 2025 is achieved, a more reasonable multiple would be 18x which translates into a 33% downside from its current level. A lower valuation can be attributed if DASH fails to meet its 2025 EBITDA target. For a company that has just managed to turn EBITDA positive, this is certainly a possibility with the US government turning its attention to illegal immigration.

While we acknowledge the potential of DASH as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than DASH but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.