DoorDash (Nasdaq: DASH) is one of the big winners of the pandemic as the use of the company's app surged. This was reflected in the company's Q2 earnings which reached a record in terms of sales. Unlike many growth stocks and recent IPOs, the stock has been a winner with a 50% gain over the past 3 months. However, it is basically flat from its opening IPO price of $175.
Currently, the company has a valuation of nearly $60 billion with a trailing 12-month revenue of $3.6 billion. Therefore, the company has to continue growing in order to realize this lofty valuation. Therefore, it's not surprising that the stock fell on management's warning that revenue growth would slow in Q3 due to higher comps and people returning to more normal behavior.
Inside the Numbers
In Q2, DASH reported a loss of $0.30 per share while the company had a profit of $0.07 per share in last year's Q2. This fell just short of analysts' forecasts of a loss of $0.06 per share. Revenue came in above expectations at $1.2 billion, a nearly 100% increase from last year's $675 million. It also slightly exceeded analysts' forecasts of $1.1 billion.
Gross order volume and total orders hit new record highs in Q2 as demand for food delivery remained strong despite in-person dining resuming across the country. Gross order volume increased 70% to $10.5 billion. Analysts were forecasting $9.8 billion. Total orders increased 69% to $345 million.
The company warned that it "anticipates a seasonal decline in new consumer acquisition and order rates in Q3." It attributed this to seasonal factors with people less likely to order food in warmer months than colder months and uncertainty due to the pandemic.
However, its forecast still came in above analysts' expectations with adjusted EBITDA between $0 and $100 million and marketplace gross order volume between $9.3 billion and $9.8 billion. This was above expectations of $8.6 billion.
Stock Price Outlook
Following earnings, shares opened down 5% but the weakness was bought as they closed up 1%. The company certainly faces some unique challenges. One is the usual obstacles of a high valuation and risks of declining growth. It also faces regulatory risk as it relies on contractors, and many states are forcing companies like DoorDash to offer them more benefits and treat them like employees.
There is also criticism that DoorDash eats into restaurant margins as the company charges high fees. San Francisco has capped the company's fees at 15% in an effort to protect restaurants. The company is opposed to these caps and said they are "unnecessary".
The bullish case on the stock rests on more people buying all sorts of items through the app. Already, they have expanded into delivering food and goods from pharmacies, convenience stores, and grocery stores. This part of the business is growing faster than the restaurant business.