Shares of DoorDash Inc jumped 16 per cent on Wednesday after the U.S. food delivery firm inked an $8-billion deal to buy Finnish startup Wolt to grab a slice of the European market and maintain its blistering pace of growth.
The deal will help DoorDash enter 22 new markets, including Germany, Denmark and Sweden, while potentially serving about 700 million customers.
“(The move) jump starts international expansion,” BTIG analyst Jake Fuller said, adding that if it were not for the acquisition, it would have taken DoorDash much longer to reach international markets through “an organic build-out.”
At least eight brokerages cheered the deal by raising their price targets on the stock. Evercore analysts said a challenge for DoorDash prior to the deal was its lack of international presence.
The takeover is expected to help DoorDash maintain its growth momentum seen during the pandemic. Analysts are estimating a 65 per cent surge in revenue this year, according to Refinitiv data.
“This partnership is really about acceleration and expansion, to play for a bigger prize on an even larger global stage,” DoorDash Chief Executive Officer Tony Xu said on a conference call on Tuesday.
Through the all-stock deal, Wolt – which made its first delivery in Helsinki, Finland in 2015 – would be valued at about three times its expected gross order value of $2.5-billion “(The deal) speaks volumes that DoorDash would rather buy a sector challenger for more than its own trading multiple than to acquire incumbents at one-third of the valuation,” Jefferies analysts said.
DoorDash shares, which have nearly doubled since their initial public offering in December, were trading at $223.50 before the bell.
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