DoorDash’s stock took a hit after earnings. Morgan Stanley says not to worry.

When delivery app DoorDash Inc. reported quarterly earnings last week, investors raced to the exits. But Morgan Stanley analysts on Thursday said to buy the dip, arguing that the company’s restaurant, grocery and non-grocery delivery business still had plenty of room to grow.

Analysts there upgraded the stock to overweight, their most positive rating, from equal-weight, and raised their price target to $145 from $135. And they said the stock could get to $175 if their profit expectations play out better than planned over the next few years.

Shares of DoorDash
DASH,
+5.83%
were up 5% on Thursday.

“We see DASH’s core product addressing ($2.6 trillion) of offline spend across its U.S. restaurant, international restaurant and U.S. grocery / new vertical businesses,” Morgan Stanley said in a research note.

“While not our base case, as a bull case, DASH’s emerging non-grocery retail business (delivering users non-grocery retail items) would add another $1.8trn of offline spend in the U.S. alone,” they added. “So the runway for growth is long.”

The analysts said that investors had been worried about stiffer competition and DoorDash’s investments to expand into areas beyond restaurant delivery.

But they said that DoorDash had tightened up how it routes and places drivers, developed a more “targeted” approach to acquisitions, and noted what they said were increasingly loyal subscribers to its DashPass service, which offers customers reduced fees.

As of the fourth quarter, Morgan Stanley said, nearly half of DoorDash’s monthly active users were DashPass subscribers. Even if more subdued subscriber and spending growth continues, they said, DoorDash could put up “mid-to-high teens” growth in gross order value, or the total dollar value of orders made on the platform.

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