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What The DoorDash S-1 Filing Means For Uber

What The DoorDash S-1 Filing Means For Uber

After months of anticipation, food delivery giant DoorDash officially filed its S-1 document on Friday ahead of its upcoming IPO.

While the filing gave potential DoorDash investors their first glimpse into the company’s financials, Bank of America analyst Justin Post said it also contained some useful insights for Uber Technologies Inc (NYSE: UBER) investors.

Uber Eats Vs. DoorDash: On Friday, DoorDash said it generated $1.9 billion in revenue for the first nine months of 2020 and produced a net loss of $149 million. Post said Monday that DoorDash’s positive EBITDA margin so far in 2020 should be a proof of concept that Uber Eats can eventually be profitable. Uber Eats has roughly a negative 29% EBITDA margin, while DoorDast reported a positive 5% margin.

Post said key differences between the two businesses include DoorDash’s larger scale and density in certain markets, DoorDash’s lower exposure to lower-margin international markets and Uber’s relatively high exposure to lower take rate fast food offerings. In addition, POst said DoorDash reportedly has a 58% market share in US suburbs, which boosts its take rate and margins.

See Also: DoorDash IPO: 5 Key Takeaways Investors Need To Know

DoorDash Valuation: Population shifts away from cities and toward the suburbs has also helped DoorDash gain market share from Uber and other competitors, Post said. DoorDash reported that its market share has grown from 18% in 2018 to 50% in October 2020.

“Though DoorDash’s 10% EBITDA margin for Q3 is 26pts better than Uber’s Delivery segment at (16%), we think Uber investors should look favorably at the profitability potential of the US delivery market,” Post said.

In addition, he noted that DoorDash’s post-IPO public market valuation could be an important catalyst for Uber’s share price in the coming months.

Benzinga’s Take: Uber Eats has been a saving grace for Uber in an extremely difficult year for ridesharing. Uber has never been able to come close to turning a profit with its food delivery business, but the DoorDash S-1 filing clearly demonstrates that the food delivery model can be profitable if executed correctly.

Latest Ratings for UBER

Jan 2021Morgan StanleyMaintainsOverweight
Jan 2021BTIGMaintainsBuy
Dec 2020KeyBancMaintainsOverweight

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