DoorDash Inc Ordinary Shares (NYSE: DASH)
Last Price: US$56.56 | Fair Value: US$159.00
Business Strategy & Outlook:
DoorDash holds the number one position as an online food order aggregator in the U.S., ahead of Uber Technologies’ Uber Eats and Grubhub. The firm is at the early stages in trying to attract a larger piece of what is estimated to be $1 trillion worth of goods and services by 2025 to its platform. DoorDash benefits from the network effects between merchants, deliverers (or “dashers”), and consumers, plus intangible assets, in the form of data, which together warrant narrow moat ratings. Consumers use DoorDash’s app to order food for pickup or delivery from restaurants. Based on data from Second Measure, DoorDash currently is the market leader in the U.S., with 56% share, above Uber’s 26% and Grubhub’s 18%. The firm has over 450,000 merchants, more than 20 million consumers, and more than 1 million dashers on its platform. It is seen that the primary market DoorDash is targeting aggressively, consumer spending on food and beverages away from home, as attractive and expect it to grow 4%-5% annually during the next five years. DoorDash has also begun to provide similar service to businesses in verticals other than restaurants, such as grocery, retail, pet supplies, and flowers. With strengthening of the network effect, it is expected that DoorDash will maintain its leadership position in a market where there will be only one other viable player, Uber Eats, in the long run. The firm’s network effect should also lower consumer and deliverer acquisition costs, resulting in further operating leverage and GAAP profitability in 2023.
Risk and Uncertainty:
DoorDash is also susceptible to blame for possible missteps in data utilization and/or lack of data privacy and security, which is also considered an ESG risk. In addition, as deliveries to consumers by DoorDash on behalf of merchants are made mainly by gig workers, the firm is likely to face continuing pressure from lawmakers to provide higher pay and more benefits, and to possibly categorize those contractors as employees, all of which is seen as another ESG risk. While voters in California sided with firms such as DoorDash and with gig workers in 2020 by approving Proposition 22, it remains uncertain what actions other voters, and other states, and federal lawmakers are likely to take. Whether the immediate change in consumer dining behavior that was observed in 2020, mainly driven by the COVID-19 pandemic, will last is also a risk. A return to the pre-pandemic normalcy could decelerate or completely stop DoorDash’s growth.
Bulls Say:
Company Description:
Founded in 2013 and headquartered in San Francisco, DoorDash is an online food order demand aggregator. Consumers can use its app to order food on-demand for pickup or delivery from merchants mainly in the U.S. The firm provides a marketplace for the merchants to create a presence online, market their offerings, and meet demand by making the offerings available for pickup or delivery. The firm provides similar service to businesses in addition to restaurants, such as grocery, retail, pet supplies, and flowers. At the end of 2020, DoorDash had over 450,000 merchants, 20 million consumers, and over 1 million dashers on its platform. In 2020, the firm generated $24.7 billion in gross order volume (up 207% year over year) and $2.9 billion in revenue (up 226%)
(Source: Morningstar)
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