DoorDash Jumps as Q4 Beat Breaks Losing Streak

The US food delivery giant has upset expectations of weaker growth in the sector, which was among the victims of the tech sell-off

James Gard 17 February, 2022 | 11:15AM
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Door Dash app

Shares in DoorDash (DASH) jumped as much as 20% at Thursday’s US market open after the food delivery firm beat earnings forecasts and insisted pandemic growth levels can be maintained in 2022.

The results show "the firm’s network-effect moat source remains intact, demonstrated by continuing growth in orders, order frequency, and merchants on the firm’s platform," according to Morningstar tech sector analyst Ali Mogharabi. 

"We think DoorDash’s more aggressive investments to widen its delivery service and geography, combined with more couriers, could yield attractive returns in terms of more subscribers and higher frequency," Mogharabi adds.

Thursday's rally defied a 35% year-to-date decline for the stock. The recent weakness matched that of other global food delivery companies like Just Eat Takeaway (TKWY), off 12% this year, and Deliveroo (ROO), down 30%. Despite the latest jump, DoorDash is trading at a stark 51% discount to Morningstar's new fair value of $163.

Mogharabi also highlighted signs of improving demand, citing a 35% jump in total orders compared to the same quarter last year. Continued adoption of food delivery among consumers and DoorDash's branching out into delivering other goods than food helped with the expansion, he writes in a note. 

"With additional delivery service categories, DoorDash appears to keep consumers on the platform longer, which has driven a higher subscriber count."

First-Day Pop

DoorDash floated in late 2020 with an IPO price of $102. On the first day of trading, shares surged 80%. Its stock then rode repeated coronavirus waves, peaking at $245 in November 2021, before sliding all the way below $100 in a few months. The company has also been caught up in the the recent US tech sell-off, which claimed Facebook owner Meta Platforms (FB) as a casualty. But as that example showed, investors are looking for bargains in this beaten-up sector.

DoorDash bought Finland’s e-commerce platform Wolt in November 2021. Although at expensive terms, Mogharabi expects the deal to help drive 18% annual growth for DoorDash over the next five years. 

"As the network effect strengthens and consumer and deliverer acquisition costs decline, we expect further operating leverage leading to DoorDash generating operating income in 2023," he says. 


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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Deliveroo PLC91.54 GBP0.00Rating
Delivery Hero SE124.95 CHF0.00
DoorDash Inc Ordinary Shares - Class A67.45 USD0.00
Just Eat Takeaway.com NV18.11 EUR0.00Rating
Meta Platforms Inc Class A160.68 USD0.00Rating

About Author

James Gard  is content editor for Morningstar.co.uk