DoorDash's "Highly Uncertain" Future

Company Overview DoorDash is an online platform that connects consumers, merchants and dashers together to deliver an array of services such as food delivery, groceries, and more recently, prescription deliveries. The online logistics platform works to allow merchants to fulfill consumer demand, allow consumers to place advance orders, skip lines and the app also accepts online payments for consumer purchases. As well, the merchant's software portal allows merchants to track their business performance through a number of different metrics. Their revenue model consists of three main streams: Delivery and Service Fees - DASH earns on delivery fees that are charged to customers for the delivery after a portion of it is compensated to the dashers. Service fees are also included as a percentage of a customer's order subtotal and cover a variety of costs for DASH such as technology development, marketing and payment processing which is done through a third-party service Business Commissions - DASH receives a small commission from the businesses for providing the service of connecting their business to target audiences Restaurants either pay between 15%-30% commission per order depending on which plan the restaurants opt into DashPass - this subscription service that is tailored to frequent app users charges a flat $9.99/month and gives customers the ability to save money on delivery fees and service fees at a reduced rate Short-Term Industry Outlook The COVID-19 pandemic has caused a delivery boom in the food delivery industry The top 4 U.S food-delivery apps (DoorDash, UberEats, Grubhub, and Postmates) saw a collective revenue rise of $3B in 2Q2020 AND 3Q2020 2019/2020 food delivery app revenue rose by 20.3% Projected slowed growth in food delivery for 2020/2021 expects 7.7% from previous YoY growth of 20.3% COVID-19 restrictions being lifted amongst mass vaccination allows people to eat out more instead of ordering in The industry will see slowed growth this year due to restaurants opening back up for dine-in services Consumer behaviour will gravitate back to pre-COVID level  General consensus is that America is eager to go out, do "normal things" again and return back to pre-COVID Financial Information Between 2019 to 2020 revenue soared over 200% YoY primarily due to COVID-19 driven consumer behaviour There is no sure sign their high growth will continue from 2020 onto 2021 Despite beating analysts revenue estimates for 4Q2020, DASH reveals a large net loss Loss of $312M ($2.67/share) mainly attributed to IPO-related costs and stock-based compensation Large loss is more than double of 4Q2019 net loss of $123M Fiscal year 2020 presented a loss of $461M ($7.39/share) on $2.89B in revenue DASH is currently trading at over 100% of its IPO price ($40) highly overvalued IPO  Why I'm Short-Term Bearish "The circumstances that have accelerated the increase in Total Orders stemming from the effects of the COVID-19 pandemic may not continue in the future, and we expect the growth rate in Total Orders to decline in future periods." - From their S-1 Form (https://www.sec.gov/Archives/edgar/data/1792789/000119312520292381/d752207ds1.htm)  DoorDash themselves realize that the company's business has peaked since the pandemic has created the perfect environment for delivery service companies to excel. Given mass vaccination in place with 35.5% of the United States's population fully vaccinated, orders and revenues for DoorDash are expected to fall as people are eager to get out and no longer want to pay the markup prices by ordering through DoorDash. Moreso, with earnings coming up after hours today and DoorDash's "highly uncertain" financial outlook for 2021, it gives reason for individuals with a position to be concerned.  Sources: https://www.businessofapps.com/data/doordash-statistics/ https://oyelabs.com/doordash-business-model/ https://www.cnbc.com/2021/02/25/doordash-dash-q4-2020-earnings.html https://www.reuters.com/article/us-doordash-results-idUSKBN2AP2V2 https://www.marketwatch.com/story/the-pandemic-has-more-than-doubled-americans-use-of-food-delivery-apps-but-that-doesnt-mean-the-companies-are-making-money-11606340169 https://www.businessofapps.com/data/food-delivery-app-market/

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DoorDash's "Highly Uncertain" Future

bearish

Company Overview

DoorDash is an online platform that connects consumers, merchants and dashers together to deliver an array of services such as food delivery, groceries, and more recently, prescription deliveries. The online logistics platform works to allow merchants to fulfill consumer demand, allow consumers to place advance orders, skip lines and the app also accepts online payments for consumer purchases. As well, the merchant's software portal allows merchants to track their business performance through a number of different metrics.

Their revenue model consists of three main streams:

  1. Delivery and Service Fees - DASH earns on delivery fees that are charged to customers for the delivery after a portion of it is compensated to the dashers.
    • Service fees are also included as a percentage of a customer's order subtotal and cover a variety of costs for DASH such as technology development, marketing and payment processing which is done through a third-party service
  2. Business Commissions - DASH receives a small commission from the businesses for providing the service of connecting their business to target audiences
    • Restaurants either pay between 15%-30% commission per order depending on which plan the restaurants opt into
  3. DashPass - this subscription service that is tailored to frequent app users charges a flat $9.99/month and gives customers the ability to save money on delivery fees and service fees at a reduced rate

Short-Term Industry Outlook

  • The COVID-19 pandemic has caused a delivery boom in the food delivery industry
    • The top 4 U.S food-delivery apps (DoorDash, UberEats, Grubhub, and Postmates) saw a collective revenue rise of $3B in 2Q2020 AND 3Q2020
    • 2019/2020 food delivery app revenue rose by 20.3%
  • Projected slowed growth in food delivery for 2020/2021 expects 7.7% from previous YoY growth of 20.3%
  • COVID-19 restrictions being lifted amongst mass vaccination allows people to eat out more instead of ordering in
    • The industry will see slowed growth this year due to restaurants opening back up for dine-in services
    • Consumer behaviour will gravitate back to pre-COVID level 
      • General consensus is that America is eager to go out, do "normal things" again and return back to pre-COVID

Financial Information

  • Between 2019 to 2020 revenue soared over 200% YoY primarily due to COVID-19 driven consumer behaviour
    • There is no sure sign their high growth will continue from 2020 onto 2021
  • Despite beating analysts revenue estimates for 4Q2020, DASH reveals a large net loss
    • Loss of $312M ($2.67/share) mainly attributed to IPO-related costs and stock-based compensation
    • Large loss is more than double of 4Q2019 net loss of $123M
  • Fiscal year 2020 presented a loss of $461M ($7.39/share) on $2.89B in revenue
  • DASH is currently trading at over 100% of its IPO price ($40)
    • highly overvalued IPO 

Why I'm Short-Term Bearish

"The circumstances that have accelerated the increase in Total Orders stemming from the effects of the COVID-19 pandemic may not continue in the future, and we expect the growth rate in Total Orders to decline in future periods." - From their S-1 Form (https://www.sec.gov/Archives/edgar/data/1792789/000119312520292381/d752207ds1.htm

DoorDash themselves realize that the company's business has peaked since the pandemic has created the perfect environment for delivery service companies to excel. Given mass vaccination in place with 35.5% of the United States's population fully vaccinated, orders and revenues for DoorDash are expected to fall as people are eager to get out and no longer want to pay the markup prices by ordering through DoorDash. Moreso, with earnings coming up after hours today and DoorDash's "highly uncertain" financial outlook for 2021, it gives reason for individuals with a position to be concerned. 

Sources:

  1. https://www.businessofapps.com/data/doordash-statistics/
  2. https://oyelabs.com/doordash-business-model/
  3. https://www.cnbc.com/2021/02/25/doordash-dash-q4-2020-earnings.html
  4. https://www.reuters.com/article/us-doordash-results-idUSKBN2AP2V2
  5. https://www.marketwatch.com/story/the-pandemic-has-more-than-doubled-americans-use-of-food-delivery-apps-but-that-doesnt-mean-the-companies-are-making-money-11606340169
  6. https://www.businessofapps.com/data/food-delivery-app-market/

 

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read-time
3 min

90.00

Target Price

9/ 10

Confidence

2-6 Months

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