Earnings Outlook: DoorDash delivery gains are expected to outlive the pandemic


While some companies with businesses that spiked during the pandemic are experiencing pain now, analysts say DoorDash Inc. will continue to grow even as the effects of the pandemic wane.

That’s largely because consumers have gotten used to app-based delivery for food and more, they say. Uber Technologies Inc.
which reported results this week, provided proof: Its Uber Eats business continued to grow, seeing a 50% increase in third-quarter gross bookings year over year.

“Restaurant delivery is feeling increasingly sticky post-pandemic,” Needham & Co. analysts wrote in a note to investors. They expect delivery retention to be about 75% post-pandemic, and about 90% among those who “primarily” use a food-delivery app, according to data from a Needham consumer survey.

Truist analysts say their credit-card data and surveys show continued momentum for DoorDash: “Our data also shows growth acceleration throughout the quarter relative to the trend observed in 2Q21, which is a good setup into 4Q21.”

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which is scheduled to report results on Tuesday, also may have taken some market share from rival Grubhub
The parent company of Grubhub, Amsterdam-based Just Eat Takeaway, reported earnings a couple of weeks ago and said total orders grew only 3% year over year in the United States.

“Grubhub is losing some share to someone,” Tom White, an analyst for D.A. Davidson who expects delivery to revert “a bit” to pre-pandemic levels, told MarketWatch. “DoorDash, Uber… that tailwind can soften the blow of the economy reopening,” he said.

Additionally, analysts expect DoorDash’s diversification will benefit the San Francisco-based company. Besides offering delivery from restaurants, DoorDash has partnerships with Bed Bath & Beyond
Albertsons Cos. Inc.
Rite-Aid, PetSmart and more. It just announced a partnership with Ulta Beauty Inc.

this week.

What to expect

Earnings: Analysts surveyed by FactSet on average expect DoorDash to post a net loss of 10 cents a share, or $84 million. The average expectation of analysts, hedge-fund managers, executives and more as gathered by Estimize is a loss of 16 cents a share.

Revenue: Analysts on average expect revenue of $1.17 billion, compared with $879 million in the year-ago quarter, according to FactSet. Estimize is guiding for $1.25 billion.

Stock movement: DoorDash’s shares have gained each of the three times after it reported earnings since it went public last year. The company’s stock is up more than 45% so far this year through Friday’s session, while the S&P 500 index 

has climbed more than 24%.

What analysts are saying

On the upside, analysts are optimistic about the possibilities as DoorDash expands internationally. As for risks, analysts are mentioning increased regulatory pressures such as caps on delivery fees.

Brad Erickson, RBC Capital Markets: “We’re intrigued at the international TAM expansion potential to the degree that the company visibly explores expansion beyond its current known road map which includes a now well-established presence in Australia alongside Japan and Germany likely getting off the ground within the next 6-12 months.”

Youssef Squali, Truist: “We acknowledge that [delivery-fee] caps represent a regulatory challenge for DoorDash and Uber Eats, but we believe both companies have been successful so far in managing through them. We also believe that both companies have the resources to continue to defend themselves against these rules, but may ultimately decide to pass on these fees partially or entirely to consumers in the form of higher prices.”

Out of 22 analysts surveyed by FactSet, 11 have a buy rating on DoorDash stock, while 10 have a hold rating and one rates the stock at underweight. The average price target as of Friday was $212.44. 

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