DoorDash and US Food Delivery Industry
This is my first sharing financial models and forecasts. This model includes my forecasted financial statements, revenue growth assumptions, the price valuation, and the abstract of the industry. Only public resources are used so my assumption might be rough and simple.
P.S. The price range and target price are only for my decision-making and self-practicing, not for any recommendation to buy or sell.
This sharing is about DoorDash (DASH) and the food delivery industry.
About DoorDash
DoorDash is a technology company that provides platform-to-customer food delivery services across the United States, Canada, Australia, and Japan. The early strategy of DoorDash is building a stronghold in suburbs and small cities because of their strong, fast growth potential. With successful marketing, logistics, and operations system, DoorDash expanded to large city.DoorDash’s market share grows from 23% to 51% from 2018 to 2021, while that of its main rival, GrubHub, drops from 41% to 15%.
Valuation:
The current/recent price of $140 of DASH is reasonable but slightly expensive. The current P/S ratio and EV/Revenue are13–15x and the average industry P/S ratio and EV/Revenue is 7x-10x.
The strong M&A activities are a key driver in this industry, the US market share and even the global market share would become more concentrated. Under the fast-growing industry, I believe the 10x revenue multiples are sustainable in the near term.
Financials:
- DASH currently holds 4.5B cash with no debt and is likely to seek a further acquisition or expand opportunities in Europe and Asia. (2021.06.09 officially announce the launch in Japan)
- DASH’s market share in the US is around 50%, calculated by gross merchandise value (GMV). I take a conservative assumption that the US market grows 1% each quarter in 2021 and DASH still holds 50% market share and 11% take rate (Revenue/GMV), the potential annual revenue in 2021 is 4.3B.
- Current assumptions do not include potential acquisitions and expansion.
- If DASH expands the operation in other countries, the current gross margin of 53% will probably not hold.
- Positive operating cash flow in 2020 and 2021Q1, expenses are under control.
Markets:
Based on the stats of how many US customers also used a competitor, DoorDash is the most appealing option for customers.
GrubHub grew slow in 2020 and lost its market shares gradually over these 3 years.
Opportunities and Uncertainty:
Food delivery is one of the high-growth industries during COVID. Whether the demand for delivery platforms will reduce after the pandemic is the primary concern for DoorDash. Under the fierce competition, it might be hard for it to maintain its high gross margin and reduce its expenses.
The growth opportunities are the low penetration rate in some cities and markets. DoorDash expands its operation in Japan where the penetration rate is low relative to its population size, leading to higher potential growth and more diversified market exposure.
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