🍕 Can DoorDash Sustain Growth?

FAAs warning for Boeing 737s.

Hey Global Investor! Here’s what you need to know before the US markets open.

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🍕 DoorDash: The Cost Of Growth?

A record number of people ordered from the food-delivery app DoorDash (DASH) during the quarter. The result: revenue beat estimates but losses widened. The company intends to bust the myth that food-delivery startups cannot grow once the pandemic recedes. Is it on the right track? (Tweet This)

Rapid Growth

DoorDash was incorporated in June 2013 after its founders – Tony Xu, Stanley Tang, Andy Fang, and Even Moore, received $120K in seed funding from Y Combinator. Within five years of its inception, the company overtook Uber Eats to become the second-largest food delivery operator in the US, behind GrubHub.

By March 2019, DoorDash had overtaken GrubHub and commanded 27.6% of the on-demand delivery market. That year, it acquired catering service Caviar from Block (erstwhile Square) for $400M. In the pre-IPO round, the company raised $400M from investors at a valuation of $16B. And at the height of the IPO frenzy, DoorDash went public in December 2020.

The company sold shares at $102 apiece and gained 86% on debut, nearly doubling on day one. DoorDash now had a market cap of $60.2B, nearly 4x from its pre-IPO funding round. As of October 2021, DoorDash operates in over 7K cities across the US, Canada, Australia, and Japan.

DoorDash charges a commission to the restaurants in addition to a service and delivery fee. Last April, the company announced a three-tier pricing plan for restaurants that wanted to use its services.

DoorDash Basic with a 15% commission and smaller delivery area; DoorDash Plus with a 25% commission and higher visibility on DoorDash app; DoorDash Premier with a 30% commission, largest delivery area, and growth-guarantee of at least 20 orders per month.

Separately, DoorDash’s white-label fulfillment delivery service called DoorDash Drive delivers orders from websites, apps, or third-party delivery platforms. The platform has no signup fee or subscription fee, but it makes money through a flat delivery fee paid by the merchant.

Many Pieces Of The Puzzle

DoorDash’s Q4 results were mixed.

Key Highlights From Q4:

  • Revenue: $1.3B Vs $1.28B expected
  • Loss Per Share: $0.45 Vs $0.25 expected
  • Gross Order Value: $11.2B Vs $10.6B expected

A record 369M orders were placed on the DoorDash app in Q4, trouncing analyst projection of 361M. Q4 revenue growth was 34% Y-o-Y as the company’s investments in newer categories and international markets started paying off.

So is 34% growth good enough? That might seem like a weak excuse after witnessing growth rates of 226%, 198%, 83%, and 45% in the preceding four quarters. But that is also reflecting the familiar trend courtesy of the pandemic. DoorDash also reported a net loss of $155M in Q4, narrower than the loss of $312M it reported during the same period last year.

Last November, DoorDash acquired Finnish company Wolt, present in 23 EU countries, for $8.1B. The transaction is expected to consummate in the first half of this year. For the current quarter, DoorDash expects Gross Order Value to range between $11.4B to $11.8B and adjusted EBITDA to be between $0M to $50M.

The company recently launched a 30-minute grocery delivery partnership with Albertsons. It also entered the same-day flower delivery market. Last week, the company launched DoorDash Capital, a cash advance service for delivery partners that’ll help them cover business expenses like payroll, equipment purchases, marketing, rent, and hiring.

Where there’s growth, there’s also controversy. A month before the company went for its IPO, DoorDash was taken to task by the District of Columbia’s Attorney General for misleading customers on how tips will be allocated to workers. The company settled the charge by paying $2.5M without acknowledging any missteps.

Over the past 12 months, the company spent $1.6B on sales and marketing alone, 104% higher than the preceding 12 months. However, with revenue growing far slower, as mentioned elsewhere in this story, the company may need to spend far more to remain relevant, especially as people venture out and life returns to some level of normalcy.

Not surprising, therefore, that the shares have dropped 63% in the last three months, dragging its shares below the IPO price of $102. Affirm anyone? DoorDash may have the largest market share, but that’s not going to be enough to drive the business forward. With pandemic-fueled growth levels unlikely to return, it will need to make many more dashes to sustain during the new normal.

Market Reaction
DASH ended at $90.55, down 2.81%.

Company Snapshot 📈

DASH $90.55 -2.62 (2.81%)

Analyst Ratings (25 Analysts) BUY 52%  HOLD 48%  SELL 0%

Newsworthy 📰

Another One: FAA issues 5G warning for Boeing 737s but says practical effects are limited (BA -1.17%)

Optimism: GE CEO sees ‘strong’ revenue growth despite challenges (GE -1.59%)

Denial: Ford CEO says automaker has no plans to spin off its electric vehicle business (F -1.97%)

Later Today 🕒

  • Alibaba Group Holdings Earnings (BABA)
  • AB InBev Earnings (BUD)
  • Block Inc. Earnings (SQ)
  • Coinbase Global Earnings (COIN)
  • Moderna Inc. Earnings (MRNA)
  • Monster Beverage Corp. Earnings (MNST)
  • Autodesk Inc. Earnings (ADSK)
  • Beyond Meat Inc. Earnings (BYND)
  • Cushman & Wakefield Ltd. Earnings (CWK)
  • Dell Technologies Inc. Earnings (DELL)
  • Discovery Inc. Earnings (DISCA)
  • Intuit Inc. Earnings (INTU)
  • Microvision Inc. Earnings (MVIS)
  • Nikola Corp. Earnings (NKLA)
  • Norwegian Cruise Line Holdings Ltd. (NCLH)
  • Occidental Petroleum Corp. Earnings (OXY)
  • Royal Bank of Canada Earnings (RY)
  • SeaWorld Entertainment Inc. Earnings (SEAS)
  • Steven Madden Ltd. Earnings (SHOO)
  • Universal Health Services Inc. Earnings (UHS)
  • Vale SA Earnings (VALE)
  • VMWare Inc. Earnings (VMW)
  • Zscaler Inc. Earnings (ZS)
  • 7:00 PM IST: Initial Jobless Claims

Today’s Market Terminology: Penny Stock

The term is generally used in the context of equities. Stocks typically trading for less than $1 per share are known as penny stocks. All of these stocks are traded OTC, many in the local markets of Denver, Vancouver, or Salt Lake City

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