As the restaurant industry, which DoorDash works with, is inherently low margin, customers will ultimately have to bear the impact of higher fees to drive profits. DoorDash’s biggest cost is related to its delivery partners and this number is variable, rising in proportion with the number of orders, giving the company little leverage. ![]() This makes us concerned about DoorDash’s unit economics. Moreover, DoorDash has not been able to turn a profit despite posting big growth over the past year and its loss over Q2 2021 was also larger than expected. Sure, DoorDash’s has posted breakneck revenue growth recently, with sales rising 3x last year and projected to rise over 45% this year, but growth rates will slow considerably in 2022. The stock trades at a whopping 15x forward revenue, almost like a software-type business that has thicker margins and more operating leverage. That said, despite the optimism, we think DoorDash stock is considerably overvalued at its current market price of $208 per share. Moreover, the company also posted stronger than expected revenues over Q2 2021 with sales rising 83% year-over-year to about $1.2 billion, despite the relaxation of some Covid-19 guidelines over the quarter, giving investors some confidence that demand could hold up reasonably well even post Covid. Firstly, the surge in Covid-19 cases in the U.S., caused by the highly infectious Delta variant of the virus, will likely delay return to office plans and this could also bode well for stay-at-home stocks such as DoorDash. The recent rally was driven by a couple of factors. The stock is also up by about 50% year-to-date. I declare that I do hold positions in DoorDash.DoorDash stock (NYSE: DASH) has rallied by almost 10% over the last month, significantly outperforming the S&P 500 which declined about 1% over the same period. Currently the stock is at the low end of its 52-week range, and 50% below the 52 Wk avg, the stock is positioned for a spike after earnings on the 16th, and I believe it will continue to climb thereafter. I believe that the 1 year target of $212 is a conservative number. Curr Assets of $4.7B and Curr Payables of $700Mi, they are well positioned with strong capitalization, solid growth and sustainable cash flow. They are on track to reach $5B+ this year, that is over 30%-40% Y/Y. Looking at the financial position: at $33B Cap, it generated $3B Rev last year. I believe DoorDash has a better model and more effective value proposition. We are shifting our habits toward connivance. ![]() Thus, it will not be affected by the reopening of indoor dining, and/or laxing of mask mandates. ![]() It’s about conveniently getting anything I desire to eat that day/night delivered, without having to drive and pick it up. Its about convenience not substitution to a sit-down restaurant. When I stop by any fast foods, Coffee shops, restaurants…, I see DoorDash pickup space reserved for Dashers, and the list is growing constantly. The demand for DoorDash is built around convenience and growth. ![]() Personally, I view DASH favorably from two prospective, business model and financial position. In a day or two, the same investors will be jumping back in. I feel that the drop is a normal reaction from nervous investors trying to deal with the anxiety of interest rate hikes and inflation numbers.
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