Investors Send DoorDash Stock Soaring On Strong Earnings, Outlook

After plummeting nearly 37% from its first earnings call, DoorDash DASH investors are jumping on the stock Friday following a strong Q1 earnings report on Thursday.

In midmorning trading, DoorDash stock was up more than 20% on volumes that by 10:45 a.m. EDT Friday had surpassed 4.2 million shares trading hands. Average daily trading volume for DoorDash stock is 2.45 million shares.

The price had reached $140.82 a share by midmorning Friday, up from its Thursday close of $115.94 a share, although it is still far off its 52-week high of $256.09. On Feb. 25, the day the company announced Q4 2020 and full-year results in its first official earnings announcement as a public company (it went public in December 2020), the stock traded at $183 a share.

The Friday boost has come from a combination of the strong earnings, a positive outlook that includes growth projections even as restaurants around the country reopen for in-person dining and a series of positive recommendations from analysts.

Wells Fargo upgraded the stock to overweight from equal weight and raised its price target to $170.

"We think DASH's beat and raise is large enough to offset the rotation to ‘value' that has afflicted ‘growth' stocks YTD," it said.

Truist Securities upgraded to buy from hold.

"Stronger-than-expected 1Q21 results and sustained momentum into FY21 so far point to DASH's solid execution and growing roster of complementary offerings, which is driving incremental value and strengthening its proposition to consumers and merchants alike, amidst a slowly reopening economy," it said in a note to investors.

Needham & Company reiterated a buy rating, saying that gross order volumes (GOV) at both DoorDash and Uber (which announced last week) suggest continued strength for the firms even as the economy returns to normal.

"Importantly DASH is benefiting from its new leadership position in convenience, which added to its 40% YoY growth in non-restaurant delivery, which is now 7% of orders and importantly drives a stickier customer with greater order frequency," Needham wrote.

DoorDash reported revenue grew 198% year-over-year to $1.1 billion in Q1 and was up from $970 million in Q4 2020. Total orders jumped 219% year-over-year to $329 million. Marketplace GOV also increased significantly, rising 222% year-over-year to $9.9 billion, up from Q4's $8.2 billion. GAAP gross profit increased 233% year-over-year to $493 million, which was up from $477 million in Q4, and adjusted EBITDA was $43 million, compared to an adjusted EBITDA loss of $70 million in Q1 2020.

Earnings per share (EPS) was a loss of 34 cents, wider than expected. Analysts expected EPS of negative 26 cents on revenues of $993.3 million.

DoorDash has been growing its nonfood delivery segments, which now account for 7% of total GOV, it said, with the expectation that the segment will continue to grow. Importantly, the company said it provides improved frequency by app users.

Related:

Read: DoorDash exceeds projections in Q1 earnings, stock rises after hours

Read: DoorDash adjusts pricing scheme, lowering some costs for restaurants

"Once you begin to use multiple categories, that actually increases your engagement with the core restaurant category," said CFO Prabir Adarkar on the earnings call. "And then the other thing we found is that customers who actually engage with us across different categories beyond food also appear to have stronger retention and engagement … versus consumers who place their orders with restaurants only. So we're actually seeing strength because the addition of categories basically makes a user stickier with our platform."

Adarkar said the company was "encouraged by the trends that we saw in the first quarter, particularly as markets reopened and in-store dining grew."

"The negative impact to consumer behavior was smaller than we had initially anticipated, and that enabled us to actually beat our Q1 guidance by 9%," he said. "What's driving that is the commentary we made … in our earlier earnings call. We talked about consumer behavior being sticky. So as consumers begin to use the product, new habits develop, and those habits tend to persist."

DoorDash has raised its full-year guidance for GOV to a range of $35 billion to $38 billion, up from $30 billion to $33 billion.

Tony Xu, co-founder, chairman and CEO, said DoorDash's nonfood segments – grocery, convenience, etc. – grew 40% quarter-over-quarter and have so far exceeded the company's expectations.

"Things are certainly ahead of plan and exceeding our expectations there," he said.

Click for more Modern Shipper articles by Brian Straight.

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