DoorDash Sees a Year of Slower Growth as Vaccines Could Sap Delivery Demand
February 25 2021 - 6:54PM
Dow Jones News
By Eliot Brown
DoorDash Inc. prospered as the coronavirus pandemic caused
families around the country to turn to the food-delivery company
for at-home meals, taking business from rivals Grubhub Inc. and
Uber Technologies Inc.
The eight-year-old San Francisco company now sees the days of
breakneck growth coming to an end as vaccinations sweep the country
and the economy crawls toward reopening.
The restrained outlook, paired with a larger-than-expected loss
in the quarter and rising costs related to regulation, sent the
stock down more than 10% in after-hours trading.
In its first earnings report since its December initial public
offering, DoorDash showed that it continued to benefit from the
rapid adoption of food-delivery services months into the pandemic.
It logged $970 million in revenue over the last three months of
2020, up from nearly $300 million over the same period in 2019.
DoorDash said it expects total orders this year to be between
$30 billion and $33 billion, an increase of as much as 33% from
2020 -- a more modest pace than the triple-digit-percent growth
rate in recent quarters. Analysts expect DoorDash's revenue to
flatten or even decline for the first three quarters of the year
compared with 2020.
Still, Tony Xu, the company's chief executive, said there are
signs that many of the new consumers who came to DoorDash will
continue to use the platform far more than before the pandemic.
"I don't think anyone has a crystal ball on this," Mr. Xu said
Thursday. "What we tend to see is that once behaviors land for
consumers they tend to stick."
Mr. Xu pointed to Australia, where consumers flocked to delivery
at the start of the pandemic and kept using DoorDash-like services
in surprisingly high numbers as the country reopened.
DoorDash owned the largest slice of the U.S. food-delivery
market in January, according to research firm Edison Trends,
increasing its share 18 percentage points from a year earlier to
53%.
Its rapid growth has made it an extremely popular stock among
investors. Despite having only posted a single profitable quarter
in its history, the company's market capitalization stood Thursday
at more than $53 billion, making it more valuable than Chipotle
Mexican Grill Inc. and Domino's Pizza Inc. combined.
DoorDash, which was valued at $16 billion in a private funding
round less than nine months ago, has seen its shares climb more
than 60% from its IPO price as of Thursday's close.
Despite DoorDash's gains, the market remains a highly
competitive one. After a drop in marketing costs earlier in the
pandemic, sales and marketing expenses more than doubled in the
last three months of 2020 over the prior year to $347 million.
DoorDash reported a loss of $312 million versus a $134 million loss
a year earlier.
Other challenges come in the form of regulation. A fall ballot
measure in California supported by the food-delivery company gives
workers some additional benefits, while caps on commissions that
DoorDash can collect on food orders have emerged in some cities in
an attempt to aid restaurants.
The caps caused DoorDash a roughly $36 million hit on revenue,
the company said, adding that it expects the regulations will
effect its earnings throughout 2021. The company said it expects
2021 earnings between zero and $200 million before accounting for
taxes, interest and other costs, compared with analyst projections
of $246 million.
Rival Grubhub's fourth-quarter loss widened compared with a year
earlier as these caps hurt its bottom line, among other things.
Uber Eats trimmed its losses in the fourth-quarter.
DoorDash has said it spent millions of dollars to support small
restaurants through grants and free marketing during the pandemic.
It also waived commissions for restaurants with five or fewer
outlets in the initial months of the health crisis.
--Preetika Rana contributed to this article.
Write to Eliot Brown at eliot.brown@wsj.com
(END) Dow Jones Newswires
February 25, 2021 18:39 ET (23:39 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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