![]() ![]() population has now received one or more doses of a Covid-19 shot, per the Bloomberg vaccine tracker, and as Covid cases continue to recede and the economy opens up further, people should start returning to sit-down restaurants.Īlthough DoorDash stock remains down by about 33% from its February 2021 highs, we still think it looks expensive trading at over 12x forward revenues. While the 15% commission plans look attractive for restaurants, their customers will essentially be charged the difference, and it’s not clear that customers will see as much value in delivery services post the pandemic. Restaurants typically operate on thin margins and paying fees as high as 30% might not be viable. We value DoorDash at about $115 per share, about 9x forward revenues. See our analysis DoorDash Stock: Expensive Or Cheap? for more details on DoorDash’s valuation. While DoorDash stock currently trades at about $138 per share or about 11x forward revenue, Grubhub trades at about 2.5x while Uber trades at 5.5x (although their historical growth rates have been lower). ![]() 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. 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. (Photo Illustration by Rafael Henrique/SOPA Images/LightRocket via Getty Images) SOPA Images/LightRocket via Getty ImagesĭoorDash 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. BRAZIL - 1: In this photo illustration the DoorDash logo is seen displayed on a smartphone. ![]()
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