About DoorDash
In recent history, we have written an extensive analysis article on DoorDash and its stock.
In fact, some of the members of MacroHint.com’s founding team are still cool enough to call themselves Dashers.
That means they turn on the app, wait to receive orders that are worth taking (primarily determined by mileage and current gas prices during the time of the Dash), take the order(s) to the customer and get paid shortly thereafter.
Please hold your applause.
Now that you know just how cool some of us are and that we’ve written about DoorDash and its stock in the past, one of our founding partner’s has had recent thoughts inspired by an advertisement on the side of a local city bus.
Yes, as we’ve mentioned before in previous articles, sometimes you find inspiration in strange places.
While during a Dash, they saw an advertisement for a platform by the name of OpenTable.
About OpenTable
OpenTable is a restaurant reservation platform through which users can search for a restaurant (of course, that is on the platform and in your neck of the woods), select a date, time and the amount of people you wish to reserve a table for and boom, OpenTable has served its purpose and you don’t have to go through the hassle of calling ahead or not being able to make a reservation at all.
While a fairly straightforward business concept, we think it’s one that has some staying power, particularly in the more densely populated urban markets such as Chicago, New York, Washington, D.C., Los Angeles, Austin, Texas and others.
This ultimately prompted a question that has been rolling around in one of our founder’s heads for a while; should DoorDash acquire OpenTable?
Should DoorDash acquire OpenTable?
The short answer is, we think so.
We also would be extraordinarily surprised if OpenTable hasn’t already been on DoorDash’s radar.
While DoorDash is still burning through cash, as can be seen from the company’s cash flow statement (specifically, its net income on the cash flow statement), reporting -$204 million in net income in 2018, -$667 million in 2019, -$461 million in 2020 and -$468 million in 2021, this hasn’t discouraged the company from seeking and making rather large strategic acquisitions in the past.
As discussed in our previous piece on DoorDash, the company successfully acquired Finnish company Wolt (for $8.1 billion), which is essentially DoorDash but for Finland and other surrounding European markets.
This acquisition made plenty of sense from our perspective given that most DoorDash’s operations hail from the United States and in order to get its food (pun intended) in the door overseas, buying out a leader in the food delivery space in Europe seemed like a sensible idea.
Now, this was simply one food delivery company purchasing another relatively smaller food delivery company.
OpenTable is not a food delivery company.
It’s just a restaurant reservation platform.
Wouldn’t that not make sense?
We actually don’t think that’s the best way to view DoorDash.
DoorDash 4D
Specifically, in the past the company also bought autonomous driving start-up, Scotty Labs, in 2019 for $410 million.
Maybe the Dashers from MacroHint should be terrified of losing their jobs to Scotty Labs’ handywork.
Nonetheless, this is an area through which the company invested and it wasn’t necessarily directly related to food and delivery, but more so just the delivery part.
Although DoorDash currently dominates the food delivery industry, maintaining around 56% of the space, we think it would make complete sense for the company to look into dipping its beak into another avenue (aside from delivering food) that connects restaurants and diners; reservations.
At first it seems a bit unfocused, which as expressed in previous articles, we don’t like.
However, at the end of the day DoorDash is the best at connecting restaurants and diners through food and reservations aren’t all that different, if different at all.
We think OpenTable would be a way DoorDash could inch closer to strengthened, dependable long-term profitability and of course, operate as a mechanism to continue to boost its top line (revenue) for years to come as the greater overall economy experiences its ups and downs, going through more downs than ups currently.
It’s also just another competitive advantage the company can gain on its competitors (such as Uber Eats and Grubhub), owning more and more of the digital restaurant and delivery industries.
It’s also worth briefly noting that OpenTable and DoorDash are both headquartered in San Francisco, making it easier, if the acquisition were to actually come into fruition, for both companies to integrate into each other’s systems and keep close tabs on each other’s operations, leaving little to no room for conflict and/or confusion.
Lastly, it is definitely worth noting that OpenTable is currently owned by publicly traded Booking Holdings (NASDAQ: BKNG), which adds a potential layer of complexity depending on how much Booking wants to keep OpenTable a part of its business portfolio.
Obviously, this is hard to say as we are outsiders to the matter, but we think if DoorDash really wants to acquire OpenTable, it can be done.
Additional points that favor an acquisition
OpenTable already has the infrastructure and customer base, however, we think DoorDash could bring all of its technological firepower and customers onto the platform and brand new streams of revenue if it fully acquired OpenTable.
It would also enable the company the ability to make its business countercyclical in the sense that if, for whatever reason, consumers across the board began preferring to go dine in at restaurants as opposed to having their food delivered or picking it up at the restaurant (which we have view as a very, very unlikely scenario to begin with), DoorDash would not be as susceptible or sensitive to financial ruin and would be able to capitalize on this trend through OpenTable across all the markets it operates in.
All things considered, we think it’s well worth DoorDash’s time to look into exploring the possibility of fully buying out OpenTable, especially shortly after the worst of the current economic turmoil and recession occurs, which we think is far from over.
DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.