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Meal delivery service rates have soared in the wake of the coronavirus pandemic, which is good news for delivery platforms like DoorDash. But while this sharing economy company leads in food delivery sales, it remains unprofitable — one of several risks to consider for interested investors.
DoorDash plans to file an IPO sometime in the fourth quarter of this year — but nothing is certain. The company privately submitted an IPO proposal to the US Securities and Exchange Commission (SEC) in February but delayed its listing in response to the global pandemic. Reports suggest the company may go public as early as November.
Investors will need to keep their eyes and ears open for upcoming information about how many shares will be available and at what price. You’ll also need to have a brokerage account in order to purchase shares when they become available.
After it privately raised $400 million in June, investors valued DoorDash at $16 billion. But despite a 110% increase in sales between January and May, Bloomberg reported that DoorDash remains unprofitable. To be fair, Grubhub and Uber Eats — two of DoorDash’s largest competitors — were also unprofitable in the second quarter.
Unfortunately, without a public listing, it’s difficult to gauge the financial health of this company. Investors will need to wait for DoorDash’s IPO to review its balance sheet in greater detail.
Amid the stay-at-home orders that blanketed much of North America during the early months of the pandemic, food delivery sales skyrocketed. According to a report from Second Measure, meal delivery services are up 150% and DoorDash dominates the market with a 46% slice of available sales, edging out Uber Eats, Grubhub and Postmates, among others.
But there are risks to investing in DoorDash — and the industry as a whole.
For a start, DoorDash doesn’t appear to be profitable and, like other companies in the industry, seems to prize growth over profits. Another concern is the frequency with which companies in the sharing economy merge. Just last year, DoorDash acquired Caviar for $410 million. DoorDash has also discussed a potential merger with Uber. With the high degree of competition that punctuates the industry, some companies must merge to stay viable.
A third consideration for investors is the legislative battle underway between Uber, Lyft and the state of California. The future of the gig economy is uncertain now more than ever. And emerging laws could impact DoorDash’s business model and profitability.
DoorDash is a food delivery platform that serves over 4,000 cities in the US and Canada. It was founded in 2013 and is headquartered in San Fransisco.
The DoorDash database stands over 300,000 restaurants strong and orders can be made, tracked and paid for through the platform’s mobile app. Like other gig economy companies, DoorDash relies on independent contractors it calls “Dashers” to pick up and deliver customer orders.
DoorDash is not an accredited business with the Better Business Bureau (BBB) and receives an F rating for accumulating 2,617 customer complaints and failing to respond to 1,878 of them. Many complaints cite order errors, delays and unpleasant interactions with the DoorDash customer service team.
There are only a couple of publicly-traded food delivery companies on the market to compare, but here’s how a few of DoorDash’s gig economy competitors are performing:
Grubhub (GRUB) is an online food ordering and delivery platform headquartered in Chicago. It launched its stock on the NYSE in 2014 trading at $34. The stock performed moderately well until early 2017, when it began to climb. It hit an all-time high of $146.11 in September 2018 before falling back to $87.95 just one month later. It now trades at $72.62.
Lyft (LYFT) is a ridesharing company headquartered in San Francisco. Its stock went live on the NASDAQ in March 2019 trading at $78.29. To be blunt, Lyft’s stock performance has been disappointing. It tumbled downhill from its launch before hitting an all-time low of $21.27 in March 2020. It now trades at $29.96.
Uber (UBER), while well known for its ridesharing service, is also responsible for Uber Eats — a food delivery program that operates as one of DoorDash’s primary competitors. Uber’s stock launched on the NYSE in May 2019 at $41.57. The stock has had a tumultuous year, peaking at $46.38 one month after its launch and falling to an all-time low of $21.33 in March 2020. The stock has recovered somewhat but still trades below its initial value at $33.74.
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