About DoorDash
Zoom, Facebook, Amazon, and DoorDash.
These are a handful of arguably the most relied upon publicly traded companies throughout the course of the pandemic so far.
The company itself went public at the end of 2020 after starting in 2013.
Most of us know what DoorDash does.
You push a few buttons on your phone or computer, wait 20 minutes to an hour and food (or whatever—they’ve started to dabble in retail and groceries) you ordered shows up at your door. It’s either this or you specifically request for your Dasher to hand it to you, however, this was not likely a preferred option during most of the pandemic.
I shamelessly admit that I am a Dasher. Outside of writing articles for this website and my university-related extracurriculars, I get my side hustle on.
Yes, I’ve waited in line at McDonald’s to pick up a 40-piece Chicken McNuggets, yes, I’ve walked into nearly every local restaurant and swiftly announced the name of the person whose food I’m picking up, desperately hoping it’s been prepared, and I can drop it off, rinse and repeat.
After all, it’s called DoorDash, not DoorSlowMeDownSoMyCustomerCanGetMadAtMe.
I assume that DoorDash makes a lot of money from the sizeable percentage chunks they nab from their merchants, the employees being “independent contractors”, thus freeing DoorDash of certain liabilities, costs (ie. equipment such as cars, insurance etc..) and every Dasher’s favorite, when the app tells you the mileage upfront and you later find out that you drove more miles than anticipated or promised.
In this era of frighteningly high gas prices, that is NOT cool, DoorDash!
Anyway, let’s get a better idea of how financially sound the company is, how good they are at making money and whether the stock is right for your portfolio.
DoorDash stock financials
DoorDash has a market capitalization (shares outstanding multiplied by the current stock price, or current value of all the company’s stock) of nearly $25 billion.
While the company doesn’t have a readily available price-to-earnings (P/E) ratio, likely due to the fact that it has no earnings or isn’t yet profitable, some speculate the current intrinsic value of DoorDash to be just north of $180. In recent history, the stock has taken a drastic tumble, trading at a current share price of $66.23 as of this publication.
If we assume the aforementioned intrinsic value of the company to be true and what the company is worth today, it seems like it would be a great idea to pick up a few shares at a relatively steep discount.
However, especially for a company that hasn’t been around for a decade we should assume nothing.
It can be noted that the stock is trading considerably lower from its previous highs ($200 range), which naturally increases our appetite in investing in the food delivery behemoth. Some throw terms such as “behemoth” and “gargantuan” around, however, this sort of terminology is warranted given that DoorDash has 56% market share in the food delivery space and “is the largest food delivery company in the United States.”
But the proof is in the financials.
Given that the company is relatively young and still new to the publicly traded markets, we assumed like most startups that the company’s total assets and total liabilities would be unfavorably lopsided towards the ladder.
We were happily wrong.
The company maintains just over $6.8 billion in total assets and around $2.1 billion in total liabilities. If a growth monster startup like DoorDash can already control their balance sheet to a tee, what else are they able to do?
Peering through their income and cash flow statements, they generally seem to be in growth mode, as their net income for the last handful of quarters has been in the red, however, their total cash from operations has been rising overall in the same period.
Nothing screams emergency yet.
DoorDash stock fundamentals
Flipping over to the company’s profitability metrics, they currently maintain an annual net profit margin that is substantially lower than that of the industry average. Our team isn’t too concerned with this given that as the company gains more and more market share while simultaneously growing into a more mature company (likely investing a bit less in the business, beefing up their net income), they will naturally have more opportunities to widen their profit margins and reap the rewards of their previous (and current) substantial growth.
Suffice it to say, we expect DoorDash’s profit margins in general to increase as they move forward, in the next couple of years.
It should also be mentioned that a not-so-attractive annual net profit margin is by no means uncommon amongst high growth companies that are relatively new to the publicly traded market. While some companies are just full of hype and artificial growth, lacking any true intrinsic value, DoorDash is different because it has a strong value proposition and the market share to prove it.
Speaking of growth, the company’s growth in revenue in the last twelve months has been astonishingly higher than the industry’s average. Specifically, DoorDash (as of the publishing of this article) maintains a trailing twelve-month revenue growth of just above 46% compared to the industry’s 17.5%.
It’s quite impressive that a relatively new company that has such a strong grip on the delivery market while continuing to substantially grow sales.
However, as DoorDash matures, it will naturally become more difficult to continue growing at a shockingly high rate.
Thankfully, they’ve already found ways to continue growing the company and its services inorganically, through acquisitions.
DoorDash stock acquisitions
Specifically, one of their recent landmark acquisitions is their $8.1 billion purchase of Finnish food delivery company, Wolt.
These are the kinds of acquisitions that make our team want to buy shares in DoorDash.
As a market analyst from Morningstar alluded to in this interview, this acquisition was made towards the later stages of widespread COVID-19 shutdowns, when the company was likely to see a slight to major slowdown in demand for their services.
When shutdown restrictions began to ease, many across the globe were likely ready to get back out into the real world and eat at their favorite restaurant, in-person of course.
However, DoorDash’s acquisition of Wolt is a huge step in gaining more market share of the European delivery market. Specifically, as mentioned in this piece, DoorDash not only gained a lean strategic partner, but 23 countries are also on the menu.
What they may potentially lack in organic growth, they have set themselves up for the opportunity to gain from an expanded global presence.
DoorDash stock and COVID-19
To those who say that after threats of the pandemic subside, DoorDash will not be used anymore, we humbly yet affirmatively disagree.
Simply put, a lot of people got used to having food magically appear at their doors.
Pictured above is one of the founding partners and chief executive officer (CEO) of DoorDash, Tony Xu
A lot of people have jobs that make it difficult for them to go out and get a meal when they can more easily get their lunch delivered or have it ready for pick-up by a few taps on the DoorDash app.
Additionally, the company has made it significantly easier for all walks of life to want to use their services through new student discount subscription programs and Dash Pass.
DoorDash is a stock and company that investors should not sleep on.
Should you buy DoorDash stock?
As of the publication of this article, the company’s stock price has fallen nearly 72% from its all-time high of just below $206.
Where many see trouble and reasons to sell, we see objective, logical and unemotional reasons to buy.
The stock has likely been trampled by the recent decreases in market value of technology stocks across the board; this is not a DoorDash problem, but a stock market problem.
Given the company’s relatively strong financials and fundamentals, current and future prospects, continued revenue growth paired with its recent stock price decline we give the company a “buy” rating.
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.