Delivery service operator DoorDash (DASH 2.15%) is off to a rocky start. The stock has fallen 49% since the first day of trading in December 2020. One might think that the company is marked for weaker business results as the artificial gains from the coronavirus lockdowns fade away.
I think that's a mistake, which makes DoorDash a no-brainer buy at these affordable prices. This stock seems destined to bounce back in due time, whether or not the coronavirus crisis causes another market downturn.
DoorDash's fourth quarter, by the numbers
DoorDash reported fourth-quarter results last week. The stock opened 22% higher the next morning, but that doesn't mean you missed the boat on the stock. The quick gains faded just as swiftly. By the closing bell on Friday, the stock had gained just 1.4% from the pre-earnings level.
The results were a mixed bag compared to management's guidance. DoorDash had expected the gross order value (GOV) of the fourth quarter to stop near $10.5 billion, and adjusted earnings before taxes, interest, depreciation, and amortization (EBITDA) were targeted at approximately $50 million. In fact, the GOV came in at $11.1 billion, $400 million above the top end of the official guidance range. Adjusted EBITDA profits stopped at $47 million, down from $94 million in the year-ago period but roughly in line with management's expectations.
Looking ahead, DoorDash's leadership expects the full-year 2022 marketplace GOV to rise 17% year over year, landing at $49 billion. Adjusted EBITDA was given a range from breakeven to $500 million, compared to $289 million in 2021.
These figures fit into the company's generally upbeat revenue and cash profit trends:
The pandemic boost appears to have legs for the long haul. The lockdown-accelerated growth in customer counts and top-line revenue has moderated somewhat, but DoorDash still delivers impressive top-line growth. Delivery services are apparently here to stay, and DoorDash should be able to build a successful long-term business around its first-mover advantage.
It won't always be easy, of course. Customer acquisition costs are high both for new DoorDash drivers and for users of the delivery service. In the just-reported holiday period, lower marketing costs per new customer were primarily balanced out by higher driver costs, all of which makes sense given the market dynamics of the holiday season.
DoorDash isn't concerned about profits yet -- and that's OK
Don't expect the bottom-line numbers to be printed in black ink anytime soon. DoorDash keeps a tight focus on maximizing its revenue and GOV growth, reinvesting every available penny of spare cash into growth-boosting marketing or research and development.
In the fourth quarter, net margins clocked in at a negative 1.3% of total GOV, or negative 12% as measured against DoorDash's recorded top-line revenue. This company is not likely to report sustained profit on the bottom line in the foreseeable future.
So DoorDash will leave the bottom line printed in red toner for the foreseeable future. This is a high-growth business in the early days of a massive empire-building effort. DoorDash isn't a comfortable stock for value hounds, but growth-oriented investors should pick up a few shares while they're cheap and enjoy the bumpy ride to wealth-building returns in the long run.