DoorDash is joining the S&P 500, will it continue to deliver for investors?

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DoorDash, Inc. (NASDAQ:DASH) will be added to the S&P 500 index on March 24, and this development has caused the stock to gain. After closing at about $178 on March 7, when the news came out, the stock traded at about $183 on March 14. There is some basis for the gain, considering that index funds that mirror the S&P 500 index will have to add a stock to their holdings if it gets added to the index (in order to mirror the index). Investors are anticipating that this additional demand for DoorDash shares from index fund managers will boost the stock.

The company, co-founded in 2013 by its chief executive officer Tony Xu (along with Stanley Tang and Andy Fang), came out with its initial public offering on December 9, 2020, pricing its shares at $102. They gained about 85% on that day, closing at about $189. The IPO was made at a time when the company benefited from heightened demand during the pandemic lockdowns, boosting its sales. Since then, the company has been trying to grow its business, and recently reported a positive net income for its fiscal 2024 year, its first full year with a positive bottom line based on Generally Accepted Accounting Principles (GAAP). The San Franciso-based technology company sees more opportunity to grow its business, but it has also gotten its share of bad press and litigation, on matters such as its handling of tips paid to contractors, or so-called “Dashers,” who fulfill deliveries for the company. It faces multiple other risks too. While the S&P 500 addition is certainly a positive and creates more demand for the stock, will DoorDash continue to deliver for investors looking beyond that news?