DoorDash (DASH -1.39%) reported fourth-quarter and fiscal 2021 financial results after the markets closed on Feb. 16. The food delivery provider pleasantly surprised shareholders with another quarter of solid top-line growth.
The company thrived at the pandemic onset when restaurants were forced to close their dining areas -- for many, the only way to keep making sales was through delivery or pickup. As restrictions on restaurants eased, there were concerns that engagement on DoorDash would fall. That has not been the case.
Image source: Getty Images.
DoorDash sells convenience
In its most recent quarter, ended Dec. 31, marketplace gross order value increased by 36% from the same period last year. This comes on top of the 227% growth in the previous year's same quarter. Marketplace gross order value measures the total dollar value of orders placed on the DoorDash platform. The metric is critical because it is the base from which DoorDash charges service fees and derives revenue.
To increase revenue, the company can either increase the percentage it charges on each transaction or encourage an increase in the total value of transactions overall. The latter source is more sustainable in the long run. Therefore, it's an excellent sign for shareholders that DoorDash is experiencing continued growth in the metric despite economic reopening.
People continue to show a preference for the convenience offered by DoorDash. Customers can have a meal from a local restaurant delivered to their doorstep for a few dollars per order. That removes the need for transportation and waiting in line, and it frees up time to do something else while the order is delivered. The surge in orders increased DoorDash's revenue to $1.3 billion, a 34% increase from Q4 2020.
Interestingly, the convenience advantage goes beyond the consumer. DoorDash attracted over 6 million people to help the company make deliveries in 2021, when businesses worldwide were complaining of labor shortages. Dashers, as they are called, have the convenience to work when they want for as long as they want, a significant improvement from the dictated work schedules of other entry-level jobs.
DoorDash still has lots to prove
The market liked what it saw from DoorDash, and the stock was up 11.3% on the day following the announcement.
That said, the stock has been down 29% on the year and 55% in the last three months as the market remains unconvinced it can operate this business model on a profitable basis. The company lost $155 million on the bottom line on revenue of $1.3 billion. That is an improvement from the $312 million loss on $970 million in revenue in Q4 last year, but a massive loss nonetheless.
Consumers have shown a willingness to pay a few dollars for the convenience of delivery but may balk at the idea if DoorDash tries to raise prices to improve profitability. Investors will likely have to wait to find the answer to that question as economic reopening may not be the best time to implement price increases for meal delivery.
