DoorDash Tumbles After Results Fail to Impress Wall Street

(Bloomberg) -- DoorDash Inc. shares fell the most in almost two years on Friday, despite the company delivering a solid fourth-quarter earnings report. While Wall Street didn’t really find fault with the results, analysts noted that the recent run-up in the stock set the bar high.

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The delivery company reported total orders increased 23% to 574 million in the three months ended Dec. 31, better than analysts’ estimates, and posted a record number of monthly users who order more frequently. The gross value of those orders — a key metric for online delivery firms — jumped 22% to $17.6 billion, also beating Wall Street’s estimate.

But that wasn’t enough to impress investors after the shares have gained 28% this year through Thursday. The stock tumbled as much as 14% in New York on Friday, the most since May 2022, after hitting nearly a two-year high a day earlier.

Given the rally in the shares, “these results were likely not good enough,” analysts at Evercore ISI wrote in a note to investors.

Evercore also noted that adjusted earnings before interest, taxes, depreciation and amortization of $363 million didn’t exceed the high end of the company’s forecast of $320 million to $380 million. This was the first time since the fourth quarter of 2022 that DoorDash didn’t surpass its own Ebitda guidance, the analysts said.

DoorDash, the biggest restaurant delivery company in the US, has made significant investments to branch out into new categories, from flowers to alcohol and groceries. It’s also broadening out more into international markets and building an advertising business. The efforts helped push monthly active users on the platform to an all-time high of more than 37 million at the end of the year, and spurred a year-over-year increase in the average order frequency, according to the company. DoorDash is also seeing more people join its subscription offers, with members on DashPass and Wolt+ up about 20% to more than 18 million.

“Consumer demand on the platform continues to be really strong,” Chief Financial Officer Ravi Inukonda said in an interview on Bloomberg Technology. “If you look at 2023, in a year where people thought consumers were pulling back, our users set a record high.”

Efforts to improve logistics efficiency and a bigger contribution from advertising helped drive revenue up 27% in the quarter to $2.3 billion, slightly ahead of estimates for $2.24 billion. It also helped significantly narrow the net loss to $156 million from $642 million a year earlier.

San Francisco-based DoorDash added more than 100,000 new merchants to its marketplaces last year. The company has sunk significant funds into expanding the categories of offerings and geographies it serves, and its non-restaurant merchants now total more than 150,000. Royal Ahold Delhaize NV, which owns Stop & Shop and Hannaford, for example, signed on in February. Order growth in these other categories accelerated in each of the last three quarters of 2023 as frequency increased, the company said.

Still, Chief Executive Officer Tony Xu said much work remains to be done to improve consumer awareness of DoorDash’s non-restaurant delivery services. The company’s presence also “remains relatively low” in many of its overseas markets. The bulk of DoorDash’s international footprint is in more sparsely populated European countries like Sweden, Estonia, Denmark and Iceland, which it entered through its purchase of Finnish food-delivery company Wolt Enterprises two years ago.

“When I look at our international business, it is growing really fast,” Inukonda said in the interview. “Sometimes five to six times faster than peers, which is allowing us to gain share in the markets we operate in.”

For the current period, DoorDash is forecasting gross order value of $18.5 billion to $18.9 billion, with the midpoint coming above the average analyst estimate of $18.6 billion. Adjusted Ebitda is expected to be $320 million to $380 million, slightly below expectations of $360.3 million at the mid-point.

--With assistance from Antonia Mufarech.

(Updates with comment from CFO in interview and share trading)

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