Company Reports

We are lowering our fair value estimate to $135 per share from $155 following for first-quarter earnings for narrow-moat DoorDash. The second-quarter outlook suggests flat growth in gross order value and adjusted EBITDA. While not a trend, this increases the risk that growth is slowing. We have lowered our long-term growth forecasts, the main drivers of the decrease in our fair value estimate. We are still expecting the company to return to growth and margin expansion by the end of the year and be on a path to full-year profitability for 2025. On the positive side, the US grocery business continued to grow at over 100% year over year, and the international business also maintained its growth rate, so there is reason to believe DoorDash has a long runway.

DoorDash holds the number one position as an online food order aggregator in the US, ahead of Uber Technologies’ Uber Eats and Grubhub. The firm is at the early stages in trying to attract a larger piece of what we estimate could 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 we believe together warrant our narrow moat rating.

DoorDash holds the number one position as an online food order aggregator in the US, ahead of Uber Technologies’ Uber Eats and Grubhub. The firm is at the early stages in trying to attract a larger piece of what we estimate could 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 we believe together warrant our narrow moat rating.

DoorDash’s network effect moat source remains intact and like Uber is aiding the firm in gaining traction in new markets, such as grocery delivery, which we continue to believe does not bode well for no-moat Instacart. The firm posted solid fourth-quarter results with strong growth in orders accompanied by a slight increase in take rate. We are maintaining our $155 fair value estimate. While the price of DoorDash shares has more than doubled during the last 12 months, the stock is still trading at around a 20% discount to our fair value estimate.

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 we estimate could 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 we believe together warrant our narrow moat rating.

Product improvements such as more restaurant and non-restaurant options and increased on-time deliveries have helped strengthen DoorDash’s network effect, which shows up as growth in the number of orders and the average order size. The firm also stated that monthly active users increased by a double-digit rate from last year, which helped attract more high-margin ad dollars. Declining consumer and courier acquisition costs also show an improving network effect, all of which helped expand the adjusted EBITDA margin for the fourth consecutive quarter. We have raised our projections but are maintaining our $155 fair value estimate. We continue to view the stock as attractive. DoorDash’s third-quarter results also likely indicate a strong third quarter for Uber’s delivery segment.

We were impressed with narrow-moat DoorDash’s strong network effect, demonstrated by the growth in orders and gross order value per order during the second quarter. The strong improvement indicates DoorDash has retained or slightly increased its delivery market share in the U.S., likely more at the cost of participants other than Uber. While unlike Uber, the firm remains unprofitable, we commend its continuing investments in enhancing the app and adding services to attract more consumers, from which the return such as top-line growth and free cash flow will be realized over the long run. Given the firm’s larger order sizes and higher order frequency, we raised our projections but kept our $155 fair value estimate. While the stock has nearly doubled year to date, it trades at only 0.55 times our fair value estimate and remains attractive.

A solid network effect continued to propel narrow-moat DoorDash during the first quarter, with gross order value increasing 27% from the prior year (17% adjusted for the Wolt acquisition) to $15.9 billion, stronger than the $15.1 billion-$15.5 billion target that management had set in mid-February. Management also increased its GOV forecast for the full year to $63 billion-$64.5 billion from $60 billion-$63 billion, implying growth of 19% at the midpoint versus 15% previously. The firm continues to post steady gains in the core U.S. restaurant category while pushing rapidly into a variety of new categories and markets. We are maintaining our $155 fair value estimate and believe the shares remain attractive.

We maintain our $68, $34, and $159 fair value estimates of Uber, Lyft, and DoorDash, respectively, after the California appeals court ruled in their favor by upholding Proposition 22, meaning drivers and couriers will remain classified as contractors under the state's law.

The collapse of Silicon Valley Bank has created doubt about access to capital for tech firms, but we do not expect any material impact on online media or advertising firms under our coverage and we are not adjusting our fair value estimates on these stocks. The chance of Silicon Valley Bank becoming a contagion did decline a bit as of March 12. While a second bank, Signature Bank, was closed, regulators announced that all deposits at both banks will be accessible beginning on March 13.

We were pleased with DoorDash’s fourth-quarter results as the firm’s network effect moat source remained on display, with growth in users and monetization. Order frequency was stable when compared with 2021 even after the addition of Wolt. While DoorDash’s offerings are not as diversified as Uber’s, the quarterly results demonstrated the firm’s ability to attract subscribers and cross-sell other delivery services, which further strengthened the platform’s network effect and could lower consumer acquisition costs and expand margins. DoorDash expects strong growth in the first quarter and full-year 2023, which not only includes contribution from the purchase of Wolt but also solid organic growth. The firm also announced a $750 million share repurchase program. We are maintaining our $155 fair value estimate, which represents attractive upside.

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 we estimate could 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 we believe together warrant our narrow moat rating.

DoorDash’s third-quarter results support our view that the firm’s network effect remains intact. While the addition of Wolt pressured margins, we were pleased with the firm’s organic growth, underpinned by ongoing strong demand for the platform and overall online food delivery. We increased our top-line growth projection for this year and next but lowered our margin assumptions given the higher-than-expected costs related to the addition of Wolt and expansion into nonrestaurant categories. Our fair value estimate of DoorDash now stands at $155 down slightly from $159. Shares of this narrow-moat firm remain attractive, in our view.

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 we estimate could 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 we believe together warrant our narrow moat rating.

The classification of drivers and couriers as contractors was at the forefront again as the Department of Labor, or DOL, proposed rescinding rules created during the Trump presidency and returning primarily to what was in effect before. While the change may increase legal challenges against Uber, Lyft, and DoorDash, we don’t believe the chances of drivers being classified as employees have changed significantly. First, before the employee classification changes under Trump, those firms continued to successfully classify drivers as contractors. Second, over time, the firms have compromised with several states and increased benefits provided to their contractors, which we think sets precedents and strengthens their current standing if challenged. In addition, we expect the DOL’s latest proposal will muddy worker classification, creating difficulties for courts and lengthening the overall legal process.

DoorDash reported strong second-quarter results with the top and bottom lines beating the FactSet consensus estimates as gross order volume per order and the number of orders increased sequentially and year over year. While the acquisition of Wolt, which was completed in June, contributed a bit to DoorDash’s revenue growth, most of the growth was organic driven by the firm’s network effect. Management provided strong third-quarter and full-year guidance. While we raised our 2022 projections given DoorDash’s strong second quarter and the expected contribution from Wolt during the second half, we lowered growth in 2023, as we expect a tougher comp and possibly increased competition. Our new fair value estimate is $159, down slightly from $163. We continue to view the 4-star and narrow-moat-rated DoorDash as attractive.

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 we estimate could 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 we believe together warrant our narrow moat rating.

DoorDash posted strong revenue growth and while contribution margin widened year over year, the firm missed on the bottom line as investments in new markets increased further. We were pleased to see continuing indications that DoorDash’s network effect is strengthening, which likely will aid the firm in providing additional delivery services. While management increased its full-year gross order volume guidance, our projection remains at the top of the range. We are maintaining our $163 fair value estimate and believe the narrow-moat name is attractive.

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 we estimate could 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 we believe together warrant our narrow moat rating.

DoorDash reported strong-fourth quarter 2021 results as the top- and bottom-line beat FactSet consensus estimates. The firm’s network-effect moat source remains intact, demonstrated by continuing growth in orders, order frequency, and merchants on the firm’s platform. Take rates dipped a bit, which was expected as the supply side for DoorDash and other food delivery platforms is facing increasing competition from the recovery in ride-hailing, which is attracting drivers again. In the U.S., we expect DoorDash and Uber to attract couriers and improve the supply side of their platforms. 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. We only slightly adjusted our model, which when combined with the time value of money increased DoorDash’s fair value estimate to $163 from $160, representing attractive upside.