Back in January, I wrote about how DoorDash could be valued at $60bn, with solid earnings (in the future).
While I question the near-term growth beyond $60bn, today’s earnings obviously doesn’t help.
Its stock drops more than 10% after-market.
Two things that the market seems to be too optimistic about:
1/ GOV and revenue growth – won’t be amazing
While it’s amazing that DoorDash GOV grew more than 200% in 2020, its forecast for 2021 is conservative: $30bn to $33bn, or 28% growth at the middle point.
Given Q4 GOV is ~$8.2bn, it’s basically forecasting minimal sequential growth. (lower in Q3/Q3 and higher in Q1/Q4, considering seasonality)
Our outlook anticipates the successful rollout of COVID-19 vaccines, among other things. Though we cannot predict the short or long-term effects this will have on consumer behavior, our guidance assumes it creates headwinds to growth in total orders and average order values. We caution investors that the outlook for 2021 remains highly uncertain, and consumer behavior could deviate from the expectations included in our guidance. Our guidance also assumes that the timing of scaled vaccinations will coincide with our seasonally softer Q2 and Q3 periods. Consequently, our forecast assumes increasing consumer churn, reduced order frequency at the cohort level, and slightly smaller average order values beginning in Q2. Because of this, our full year 2021 guidance assumes Marketplace GOV in Q2 and Q3 will be below the levels we expect in Q1.
2/ Profits – won’t be amazing
While DoorDash posted ~10% adj. EBITDA margin for the past three quarters, it may not be able to do so in 2021.
Considering $86 million adj. EBITDA in 2020 Q3, the forecast of $0-200 million for FY2021 seems lower than what investors were expecting.
That being said, to maintain a healthy ecosystem and to withstand the normalization of life, DoorDash needs to put extra efforts in retaining users and Dashers, and business partners. And it can and will invest more in acquiring talents.
Even 2021 GOV is $30-33bn, it will diversify (more heathy/stable demand), growing outside of the food delivery business. In 2023, this number can still go to $50 billion (say 2 billion orders x $25 per order), growing at over 25%.
And on the subscription front,
While DashPass orders carry a below-average Take Rate, the average DashPass subscriber orders more frequently and stays on the platform longer than the average non-subscriber.
DoorDash is playing the long game and the business is here to stay.
Be patient.