DoorDash (DASH 1.06%) and Just Eat Takeaway (JTKWY -0.67%) are two of the world's largest food delivery platforms.
DoorDash is the market leader in the U.S., and it's been gradually expanding into Canada, Australia, and Europe. It's also in the process of buying Wolt, a Finnish delivery start-up, to accelerate its European expansion this year.
Amsterdam-based Just Eat Takeaway owns Just Eat, Takeaway.com, Grubhub, and other regional leaders. Its takeover of Grubhub last year made it the largest food delivery company outside of China, and it operates in over two dozen countries across Europe, Latin America, North America, and Oceania.
Image source: Getty Images.
DoorDash and Just Eat Takeaway both experienced robust growth throughout the pandemic as restaurants suspended on-site dining. But those tailwinds faded as lockdown restrictions were eased, and both companies now face difficult year-over-year comparisons.
DoorDash's stock has declined 33% over the past 12 months, while Just Eat Takeaway's stock has plunged 54%. Should investors consider buying either of these battered "pandemic stocks"?
DoorDash searches for growth overseas
DoorDash's revenue surged 226% to $2.9 billion in 2020. Its marketplace gross order volume (GOV), or the value of all of its orders, jumped 207% to $24.7 billion as its total orders swelled 216% to 816 million.
In the first nine months of 2021, DoorDash's revenue increased 87% to $3.59 billion. Its marketplace GOV grew 87% to $30.8 billion as its total number of orders increased 88% to one billion. Analysts expect its revenue to rise 69% for the full year, but decelerate to 23% growth in 2022.
That post-lockdown deceleration isn't surprising, but DoorDash believes its overseas expansion will stabilize its long-term growth and reduce its dependence on the U.S. market, which still accounts for nearly all of its revenue.
DoorDash's net loss narrowed from $667 million in 2019 to $461 million in 2020, and its margins on an adjusted earnings before interest, taxes, depreciation, amortization (EBITDA) basis improved from negative 54% to positive 7%. Those bottom-line improvements were driven by its improved pricing power with diners and restaurants during the pandemic.
But that pricing power waned as more restaurants reopened, and DoorDash's operating expenses rose as it ramped up its marketing efforts and expanded overseas. As a result, its net loss more than doubled year-over-year to $313 million in the first nine months of 2021, but its adjusted EBITDA margin -- which excludes its investments, acquisitions, and stock-based compensation expenses -- rose two percentage points to 7%
Analysts expect DoorDash to remain unprofitable on a generally accepted accounting principles (GAAP) basis for the foreseeable future, but the company expects to generate a flat to positive adjusted EBITDA in 2022 after it closes its acquisition of Wolt in the second half of this year.
Just Eat Takeaway is struggling with indigestion
Just Eat's revenue, on a combined basis that normalizes the growth rates of its acquisitions, rose 54% to 2.4 billion euros ($2.75 billion) in 2020. It processed 588 million orders in 2020, representing a 42% jump from 2019, as its gross merchandise volume (GMV) grew 51% to 12.9 billion euros ($14.8 billion). Those numbers don't include Grubhub, which it acquired last June.
In 2021, Just Eat's combined orders rose 33% to 1.1 billion, while its gross transaction value (GTV) -- which replaced its GMV metric after its takeover of Grubhub -- increased 31% to 28.2 billion euros ($32.3 billion).
Just Eat generated 34% of its orders in North America in 2021, making it its top region ahead of Northern Europe (27%), the U.K. and Ireland (27%), and Southern Europe, Australia, and New Zealand (12%). All four regions grew their orders by the high double-digits.
Just Eat hasn't released its annual report yet, but analysts expect its full-year revenue -- which includes its inorganic gains from Grubhub -- to increase 140% to 4.9 billion euros ($5.6 billion). But next year, the company expects its combined revenue to rise just 35% to 6.6 billion euros ($7.6 billion).
Like DoorDash, Just Eat is losing its pricing power in a post-lockdown market. It's also burdened with the expenses of integrating Grubhub, which already struggled to keep pace with DoorDash prior to its acquisition.
As a result, analysts expect Just Eat's net loss -- which already widened from 115 million euros in 2019 to 151 million euros ($173 million) in 2020 -- to widen more than five times to 772 million euros ($885 million) in 2021. Its adjusted EBITDA, which had turned positive in 2019 and 2020, is also expected to turn red again in 2021 with a loss of 359 million euros ($412 million).
Those staggering losses sparked an activist push by Cat Rock Capital, which owns 6.5% of Just Eat Takeaway, to divest Grubhub last October. A recent Bloomberg report claims Just Eat might still sell Grubhub, but that would mark a stunning reversal of a deal that closed less than a year ago.
The safer bet: DoorDash
DoorDash and Just Eat both look reasonably valued after their year-long declines. DoorDash trades at 7.5 times next year's sales, while Just Eat trades at just 1.6 times next year's sales.
I'm not a fan of either stock right now, and I wouldn't bet on a turnaround until their year-over-year comparisons stabilize. But if I had to choose one over the other, DoorDash's bottom-line stability and narrower geographic focus definitely make it a much safer investment than Just Eat.
