Doordash Investment Analysis

DoorDash Investment Analysis

1.Overview

DoorDash, founded in 2013 by Tony
Xu, Stanley Tang, Andy Fang, and Evan Moore, is a leading technology company
specializing in on-demand delivery services. Based in San Francisco, the
company primarily operates in food delivery but has expanded into groceries,
alcohol, and convenience items.

Key Features:

• Marketplace Model:
  Partners with restaurants, grocery stores, and retailers, utilizing
  independent delivery drivers ("Dashers").

• Global Presence:
  Operates in the U.S., Canada, Australia, Japan, Germany, and more.

• Subscription Services:
  Offers "DashPass," which reduces delivery fees.

• White-Label Solutions:
  Through "DoorDash Drive," it handles delivery logistics for
  business partners.

Social Impact: Initiatives like Project DASH address food security by
distributing surplus food through non-profits.

Competitors: Major rivals include Uber Eats, Grubhub, and Instacart.
DoorDash leads with a significant market share.

2.Financial Performance

• Revenue Growth:
  Averaged 30% annually in earlier years but slowed to 18% in 2023. Growth
  remains positive but is moderating.

• Profitability:
  Achieved positive GAAP net income in Q3 2024. Adjusted EBITDA and cash
  flow metrics have been improving consistently.

Q3 2024 Highlights:

• Total Orders: +18% YoY (643 million).

• Marketplace GOV: +19% YoY ($20.0 billion).

• Revenue: +25% YoY ($2.7 billion).

• GAAP Net Income: $162 million (vs. a $73 million loss
  in Q3 2023).

• Adjusted EBITDA: $533 million (+55% YoY).

3.Balance Sheet

• Cash Position:
  Stable and slightly growing at $4.96 billion.

• Debt:
  Minimal short- and long-term debt.

• Stock Buybacks:
  Leveraging lower stock prices for buybacks, funded partly by a strong free
  cash flow of $1.7 billion.

Summary: DoorDash’s balance sheet is very healthy. However, the
pace of cash position growth is a point of mild concern.

4.Valuation

• Market Capitalization:
  $72 billion.

• Key Ratios:
  P/S of 7.03, Price to Free Cash Flow ~43.

• Analysis:
  Valuation appears high but may be justified by sustained growth potential.
  Future growth will be critical in supporting the current valuation.

5.Competitive Advantages (Moat)

1. Strong Founders:
   Stanford graduates with a technological focus.

2. Customer-Centric Approach: Highly trusted platform with user-friendly app
   design.

3. Market Leadership: Leading U.S. market share (67% of
   consumer meal delivery sales in March 2024).https://secondmeasure.com/datapoints/food-delivery-services-grubhub-uber-eats-doordash-postmates/

4. Operational Excellence: Continuous improvements in delivery times, app
   usability, and service quality.

6.Growth Areas

• Expanding into non-restaurant local merchant categories.

• Enhancing logistics solutions through the DoorDash
  Commerce Platform (Drive On-Demand, Online Ordering, and more).

7.Risks

1. Highly Competitive Industry: Intense competition from Uber Eats, Grubhub, and
   others.

2. Regulatory Challenges:
   Worker rights for Dashers vary across jurisdictions, potentially
   increasing costs.

3. Economic Sensitivity:
   Strong dependence on U.S. consumer spending, making it vulnerable during
   economic downturns.

8.Value Proposition

DoorDash consistently improves service quality, delivery efficiency, and consumer value while expanding its
addressable market. Its ability to attract new users and increase order rates
among existing customers highlights its operational strength and customer
loyalty.

Appendix:

1. Latest quarter 2024 result:

In Q3 2024, we continued to drive strong growth in Total Orders,
Marketplace GOV, and revenue, while generating positive GAAP net income for the
first time as a public company.

Our goal is to build a large and durable business that helps local
merchants succeed and expands the potential of local economies. To do this, we
must consistently invest in our existing services, launch entirely new
services, and ensure we are generating strong returns on capital, so that we
can invest even more in the future. We believe our results in Q3 2024 reflect
our ambition to pursue large growth opportunities, our optimism in believing we
can innovate around the problems of the day, and our humility in focusing on
small improvements in day to day operations. We expect these characteristics to
persist at DoorDash, which means we expect to continue investing to expand the
potential of our services while holding ourselves to high standards of
execution.

Third Quarter 2024 Key Financial Metrics

•Total Orders increased
18% year-over-year (Y/Y) to 643 million and Marketplace GOV increased 19% Y/Y
to $20.0 billion.

•Revenue increased 25% Y/Y
to $2.7 billion. Net Revenue Margin increased to 13.5% from 12.9% in Q3 2023.

•GAAP net income (loss)
attributable to DoorDash, Inc. common stockholders was $162 million compared to
$(73) million in Q3 2023. Adjusted EBITDA increased to $533 million from $344
million in Q3 2023.

2. Business competitiveness analysis:

Over the last year, we improved delivery quality, reduced average
delivery times, and increased selection on our Marketplaces. Our business has
many moving pieces, but we believe they are coming together well at the moment,
and in Q3 2024 we were able to drive Total Orders up 18% Y/Y, revenue up 25%
Y/Y, net income attributable to DoorDash, Inc. common stockholders to $162
million, and Adjusted EBITDA up 55% Y/Y to $533 million. We are proud of the
work our team has done and the progress these financial results represent.

We operate in a highly competitive industry, but our focus is on meeting
consumers' expectations. In order to create value for our merchant partners,
Dashers, and our business, we must build services that delight consumers, so
that they continue to choose our Marketplaces and order more with us over time.
This is a high and constantly rising bar that requires us to build experiences
that consistently improve.

Since consumers vote with their actions, order rate 1 across our
consumer cohorts tells us a lot about the value we provide. Our existing
consumers drive the vast majority of our volume, so we must perpetually create
new value for them in order to grow efficiently. In Q3 2024, order rate
increased on a Y/Y basis within all of our more mature DoorDash consumer
cohorts 2 , with growing contributions from non-restaurant categories in each
cohort. At the same time, our new DoorDash consumer cohorts in Q3 2024
demonstrated initial order rates that were slightly higher than average initial
order rates from cohorts in the first half of 2024 and average initial order
rates from cohorts across 2022 and 2023. We believe this is an output of our
focus on consistently improving the selection, quality, affordability, and
service we provide, which can have a compounding effect over time that expands
our addressable market and increases our impact on local economies.