![]() ![]() ![]() We also think the stock is somewhat overvalued compared to other food delivery and ride-sharing stocks. We think this means that one shouldn’t really expect thick margins for Doordash even as it continues to expand. This is likely due to the fact that increasing demand for meal delivery translates into a proportionate rise in labor costs for the company’s delivery partners. Contribution margins – which are margins DoorDash earns after accounting for variable costs, expressed as a percentage of its gross order value largely remained flat at a mere 3% over the last three quarters of 2020 and actually declined to about 2% in Q1 2021. Operating loss for Q1 2021 stood at $99 million, only a slight improvement from the $123 million loss it posted in Q1 2020. DoorDash hasn’t really been able to improve the economics of its business despite its rapid growth. While the company’s demand outlook was encouraging we still have some reservations regarding the company’s profitability. DoorDash Stock has rallied by about 20% since the company’s earnings were published on May 13. The guidance certainly gives investors much more optimism about the company’s post-pandemic prospects. That marks a year-over-year growth rate of as much as 55% on the upper end of guidance. Over its Q1 2021 earnings call, Doordash actually upped its guidance for its gross order value this year to between $35 billion and $38 billion, up from a prior range of $30 billion to $33 billion. However, these fears were probably misplaced. Investors were concerned that DoorDash’s business would face the heat as the economy re-opens with people starting to returning to sit-down restaurants. The company saw revenues surge by over 3x last year as people increasingly opted for food delivery services as they sheltered at home through Covid-19. What To Expect From Alcoa’s Q2 Results?ĭoorDash (NYSE:DASH) stock was seen as a classic pandemic play.Earnings Beat In Cards For United Airlines Stock?.Lower Testing Demand To Weigh On Abbott’s Q2?.Capital Equipment Demand Growth Is Slowing, But The Stocks May Be Worth A Look.Will Target Stock Recover To Highs Seen Prior To Inflation Shock?.What To Expect From State Street Stock In Q2?.Investors Optimistic About DoorDash’s Post Pandemic Prospects Po Q1 See our analysis DoorDash Stock: Expensive Or Cheap? for more details on DoorDash’s valuation. We value the stock at a little under $120 per share, about 9x forward revenues. As the restaurant industry, which DoorDash works with, is inherently low margin, customers will ultimately have to bear the impact of higher fees to drive profits. DoorDash’s biggest cost is related to its delivery partners and this number is variable, rising in proportion with the number of orders, giving the company little leverage. While the higher multiples versus delivery are partly justified by DoorDash’s breakneck revenue growth (over 45% growth projected for 2021), we have concerns about DoorDash’s unit economics. In comparison, ride hailing and food delivery major Uber trades at about 6x projected revenue, while Just Eat, a food-delivery services company that was recently created via the merger of European players Takeaway and Just Eat trades at about 4x trailing pro-forma revenue. The stock currently trades at a high 14x forward revenue, more like a software-type business that has thicker operating margins and more operating leverage. However, despite the recent optimism, we think DoorDash stock looks overvalued at current levels of almost $180 per share. ![]() Concerns about post-IPO lockup expirations have also eased, as it is now over six months since the company went public. Analysts have also upped their price estimates for DoorDash stock, as the company focuses on expanding into new geographies and beyond its core food delivery vertical with announcements of new partnerships for groceries and other items. Sentiment for DoorDash’s stock has picked up after its Q1 results published in early May when the company raised its full-year revenue guidance, making investors more optimistic about its post-pandemic prospects. There are a couple of factors driving the gains. DoorDash stock (NYSE: DASH) has rallied by almost 25% over the last month, significantly outperforming the S&P 500 which gained about 3% over the same period. ![]()
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