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Andrew Willis: It turns out that focusing on food delivered for DoorDash (DASH). With strong fourth-quarter results including a 20% increase in order volume, the company also saw non-restaurant services like grocery up 100% year-over-year.
Senior equity analyst Ali Mogharabi says that the moat-worthy network effect at DoorDash has been on display with growth in both user base and monetization. The company is now the number one food order aggregator in the U.S., and we expect it to maintain that leadership position.
Some investors may still be betting against food delivery as the category cools post-pandemic, but now that the company’s captured the market share – why not enter other verticals, like retail, pet supplies or flowers? Indeed, DoorDash is doing just that, trying to attract what we estimate could be a trillion dollars’ worth of goods to its platform by 2025.
For Morningstar, I’m Andrew Willis.
Bulls Say
- Consumer behavior will continue to shift away from in-restaurant dining as the variety of food and speed of delivery available at home increase. As demand for DoorDash services pushes higher, the firm should quickly reach profitability.
- DoorDash will succeed in delivering other goods and services, strengthening its number-one position in the U.S.
- More regulations such as minimum wages or more benefits may pass, but they will also create a barrier to entry and force out subscale players.
Bears Say
- The transition toward food delivery or pickup is probably not permanent and will likely slow or come to a halt as the pandemic ends, lessening chances of DoorDash becoming profitable.
- More regulations regarding gig workers and their compensation will drive costs higher, either eating into DoorDash’s margins or forcing up prices, thus cutting demand.
- Without any barriers to entry, retail behemoths such as Amazon will eventually use their logistical prowess to enter the market and displace DoorDash.
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