Food delivery business DoorDash (DASH 3.12%) will report its fiscal-year 2021 fourth-quarter results on Feb. 16. Consumer demand for its services has exploded since the pandemic onset.
The burst was more pronounced when governments mandated restaurants to close for in-person dining. Investors worried that demand would decrease for DoorDash when restaurants reopened. That has not been the case so far. Sales growth is slowing down, but not reversing. With DoorDash reporting Q4 earnings on Feb. 16, investors will want to see demand for food delivery remain robust.
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Economic reopening could be decelerating revenue growth at DoorDash
In its third quarter of 2020, DoorDash's revenue increased by 268%. The rate of growth has decelerated in every quarter since, culminating at a 45% increase in Q3 2021 ended Sept. 30. It was to be expected for its revenue growth to slow down. After all, 268% is an astronomical and unsustainable rate of increase.
To propel sales further, DoorDash is partnering with merchants outside of restaurants. As of Sept. 30, DoorDash has signed up over 500,000 merchants worldwide. With more merchants comes more expansion to DoorDash's platform. Even though it started as a food delivery service, it is trying to expand into additional segments including groceries, convenience, pet products, and more. These are categories where consumers would possibly desire speedy delivery.
DoorDash generates revenue by taking a percentage of customers' order value. Adding categories like groceries could also increase average order values. An individual ordering groceries for a household with children can easily make an order for several hundred dollars. Order sizes for food delivery will rarely, if ever, reach that sum.
In its most recent quarter, ended Sept. 30, gross order value increased by 44% to $10.4 billion. Management guided investors to look for gross order value from $10.3 billion to $10.7 billion when it reports earnings on Feb. 16. Still, this guidance was before the rise of the omicron variant of the coronavirus disease caused cases to surge. It will be interesting to see if this increased consumer willingness to pay the extra fees for the convenience to have their food and other items delivered.
What this could mean for DoorDash investors
Analysts on Wall Street expect DoorDash to report revenue of $1.28 billion and a loss per share of $0.27. If it meets those projections, that would be increases of 32.10% and 89.88%, respectively, from the same period the year before.
Despite those rising operating performance expectations, the market is not keen on DoorDash. The stock has been down 48% in the last three months. The fall in the stock price has DoorDash trading at a price-to-sales ratio of 7.5, near its lowest point in its brief history as a public company. If management can show progress in developing new categories for delivery, it may be the catalyst that stops the stock from falling further.
