Food delivery company DoorDash (DASH -7.47%) was in the right business at the right time at the onset of the pandemic. With in-person dining restrictions, hungry customers chose to order takeout and delivery from their favorite restaurants. DoorDash's platform helped restaurants survive the outbreak as online orders became the only option for businesses that had to otherwise shut down completely.
The company is quickly branching out into delivering other items its users often want in a hurry. Those additions -- plus recurring orders from its most loyal customers -- helped push revenue over $1 billion in the third quarter.
DoorDash is proving it's not just a stay-at-home stock
The company makes money by charging fees to restaurants and diners for orders made through its platform. In all, DoorDash generated $1.28 billion of revenue in the third quarter. That marks the third consecutive quarter where the company has passed the $1 billion milestone. Revenue was up 45% year over year, but that growth rate is decelerating as economies reopen and consumers have the option of dining out again.
Still, it's impressive DoorDash is managing to deliver nearly 50% growth on top of the 268% surge it reported in the prior-year period. Some investors feared there would be a severe headwind from consumers returning to their pre-pandemic habits, forcing DoorDash to lose much of the progress it made in the past two years. But DoorDash has proven to be a valuable convenience for its users.
To serve its users in new ways, DoorDash is signing on retail partners beyond restaurants. Its marketplace for non-restaurant merchants has grown for several consecutive quarters, and at the end of the latest period, DoorDash boasted 40,000 of these merchants on its platform. A growing selection makes DoorDash more appealing to users, and for retailers, it's a way for them to connect to consumers who, even before the pandemic, have been shopping less frequently in person.
Also fueling DoorDash's revenue growth is a group of high-volume users in its DashPass program -- a $9.99 monthly subscription that offers free delivery and reduced service fees. In the third-quarter shareholder letter, management said DashPass members order more than non-members do. And management highlighted that the service now has over nine million subscribers.
DoorDash's stock soars as revenue grows
The market liked what it saw from the company, and its stock is up 28% since the earnings release. With each passing quarter, DoorDash further chips away at any concern it was a stay-at-home stock that could only thrive thanks to short-term tailwinds.
Overall, DoorDash stock is up over 70% year to date. Investors should keep in mind the company is not yet profitable. It has reported $625 million of net losses in the past four quarters, but in the process, it is delivering impressive growth and establishing itself as a leading platform for restaurant (and non-restaurant) service.