Evie Liu
Food-delivery companies have struggled to earn profit due to the high cost of driver payments and heavy marketing expenses to acquire and retain customers. As the companies scale, some may eventually inch closer to profitability.
DoorDash, which is set to report first-quarter results on Wednesday after the market closes, isn't there yet. For the first three months of 2024, the firm is estimated to have processed nearly 607,000 delivery orders, up 18% from the same period last year, according to FactSet. That means a 20% growth in revenue, which is expected to reach $2.45 billion in the quarter.
Beyond strong topline growth, analysts expect DoorDash to lose $21 million, or three cents per share, for the first quarter, significantly up from the 41 cents per-share loss a year ago. DoorDash has never generated a profit except for the second quarter of 2020, when it posted net income of $23 million amid the Covid-19 pandemic. Losses have deepened since then and reached $640 million in the last quarter of 2022.
But things have improved over the past year. In 2023, while revenue grew 31% from the year before, operating expenses increased just 20%. Analysts now expect the company to finally turn a profit in the third quarter this year.
Over the past year, DoorDash has continued to expand its monthly active users and DashPass subscribers to boost the frequency of orders. Its expansion into grocery and other retail delivery also helped increase orders through a series of partnerships with retail brands.
"DoorDash is uniquely positioned to help retailers bolster their localized digital commerce strategy to compete with the likes of Amazon, " wrote Benchmark analyst Mark Zgutowicz in a note this week.
Amazon.com recently started offering a comparable grocery-delivery service for its Prime members that will heat up competition in the already crowded market.
DoorDash recently joined with Wing, Google's drone delivery arm, and started testing the service in selected markets for Wendy's. If the technology is widely adopted, it could improve the firm's unit economics since it won't have to pay the labor costs of drivers.
On the coming earnings call, Zgutowicz said he expects initial insight on the test and details on DoorDash's estimates on future drone delivery cost savings. "We view this venture as a potential long-term profitability lever," he wrote.
The stock has more than doubled over the past 12 months, to $129.26 as of Tuesday's close.
Write to Evie Liu at evie.liu@barrons.com
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May 01, 2024 03:30 ET (07:30 GMT)
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