DoorDash relies on the evolving online market as it just went public a week ago.
Despite the revenue of leading food delivery specialist more than being tripled in 2020, DoorDash, Inc. (DASH) might have hit its peak already. Here’s why?
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DoorDash, a leading third-party food delivery network, has recently gone public and the circumstances are unfavorable right now to invest in the stock. As an investor, you want to make profit and that’s not coming at the moment. But, yeah, it’s definitely a stock to look after in the future—based on wealth maximization.
There’s a lot to like about DASH, what it offers and for a reason, it is the country’s leading third-party app for restaurant delivery. However, there are certain aspects that are important for investors go past the stock.
Let’s have a look at both; the potential and unfavorable aspects of DoorDash.
What the Potential?
A third-party app that offers its services across more than 850 cities in the U.S. and cities including Canada, DoorDash is setting up to launch its network in Australia in near future.
DoorDash is the fastest-growing third-party app along with top competitors like Uber Eats, Postmates, and Grubhub.
The online market has evolved more than ever in the pandemic period, especially in severe lockdown days. A large number of orders were placed during lockdowns. Amazon had to hire up to 70K more workers to meet the growing demand for online deliveries.
Data reported by Second Measures noted that DoorDash had a total share of 45% in the food delivery app market in June 2020. It surpassed UberEats that resided at almost 24% while, Postmates was third on the list with an 8% share.
Considering the revenue growth, DoorDash will look like the perfect stock. The company increased its revenue adding 204% more from last year, reported at $885 million. Due to high online demand, the business has soared up to 226% for the first three quarters of 2020.
Well, this factor can’t be taken for granted. The business has picked up online growth due to restrictions at restaurants and people don’t have a choice rather than to order online.
Is DoorDash profitable? Not yet!But How?
In 2019, the company recorded revenues between $900 million to $1 billion. Despite that, it still faced a loss of $450 million last year.
Later, the company followed up by a $400 million capital from investors in June. This almost ended the debate of an IPO that happened on Dec. 9. This was not convincing from the company as it showed uncertainty on both decision-making and financial ends.
DoorDash is currently valued at $48.42 billion. The stock price has plunged from the IPO day high of $195.50 to $155.67, as we write this on Monday.
The accelerating top-line growth and improving bottom line results at DoorDash may justify the reason for the company going public. But the company has entered the market at a vulnerable time.
Since the vaccine news breakthrough was announced, the stay-at-home stocks have plunged from the favorable line. The future prospects are not standing tall with DoorDash and the market share growth has entered a straw zone.
Moreover, the ongoing bearish trend of DASH completely justifies the debate that the shares will further squeeze out.
The other factor is the increasing competition in the likes of UberEats and Grubhub. The spell of spending has driven the industry into consolidation, with Grubhub selling itself to Eat Takeaway and Uber acquiring Postmates. In addition, Amazon closing off its own restaurant delivery app while DoorDash purchasing Caviar from Square.
Another aspect remains the increasing resistance from restaurants. The growth of the online industry has largely impacted the restaurant’s profit margins. Also, the interests of these third-party apps are not aligned with restaurants at all.
Buying DoorDash at a quite high price despite dipping after the IPO is still not the right choice. Let things settle down and give some time to DASH to sink with the stock market.