![]() It would be prudent for investors to wait to buy shares until DoorDash proves it can generate profits under its current business model or makes a transformative leap in reducing costs or adding scale. But that is not likely enough to make DoorDash a good investment. There is a portion of the population like parents of young children, those with disabilities limiting their ability to drive, and the elderly to name a few who will perpetually benefit from having the option of ordering food to be brought to their doors. In the aftermath of the pandemic, which may not be for a while, folks will likely still look to ordering meals for delivery. If it can pick up meals, groceries, medication, and flowers, all for one customer in one comprehensive order, that can be much more profitable than delivering just a meal. The more things that DoorDash can pick up and deliver, the more customers it can serve and the more money it can make. Ultimately, DoorDash is a company that picks up and delivers items that customers usually need in less than an hour. It isn't proving easy to earn a profit when you take 10%-15% of orders that are mostly under $100. Even though revenue tripled in its most recent quarter, it still lost $110 million on the bottom line. So the stock is not cheap, but it does come with a large market opportunity.Īdditionally, DoorDash is not yet profitable. What about valuation?ĭoorDash is trading at a forward price-to-sales ratio of 10.89, roughly 33% below the peak of 15 it was trading for earlier this year. If a customer orders a basket of groceries on DoorDash, its platform can nudge the customer to make an order from a restaurant on the drivers' path for a discount. ![]() It also adds complementary benefits for DoorDash. Adding new categories is a step in the right direction for profitability in the long run. Moreover, customers who order convenience or groceries tend to order meals more often as well. If DoorDash can capture even 5% of the convenience and grocery market in the next few years, it could mean revenue increases by more than 500%. DoorDash generally makes its revenue by taking between 10% and 13% of an overall order's value (its take rate). Still, DoorDash is the market leader in convenience delivery, a market it entered only a year ago. As of right now, DoorDash has tiny shares of both of those markets. ![]() The two are huge market opportunities, estimated by DoorDash CFO Prabir Adarkar to be $225 billion and $900 billion at the midpoints, respectively. The influx of business allowed it to invest in new delivery categories, like convenience and grocery. And because of the pandemic, DoorDash achieved several years' worth of revenue growth in just one year. So this huge jump in revenue is significant. That was up from just $362 million in the same quarter a year ago (the pandemic didn't close many restaurants until the final two to three weeks of 2020's Q1). Revenue increased to $1.1 billion in the most recent quarter. That isn't to say that it won't eventually happen, just that consumer behavior has not changed all that much yet. That's certainly good news for shareholders concerned that folks would significantly reduce ordering meal deliveries as restaurants reopened. ![]() Here is what CEO Tony Xu had to say in the company's first-quarter conference call:Īnd what I'll say is that the impact of reopening really has been more muted than we expected, certainly, when we were looking at this last fall and even as we're starting to prepare for this toward even last summer. Interestingly, as economies reopen and states ease restrictions on restaurants, consumers are maintaining many of the habits they acquired during the pandemic. ![]()
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