DoorDash (DASH) is having an interesting first year on the stock market.DASH premiered on the NYSE at $189.51 on 9 December 2020 and rose to $210.37 on 10 September 2021.
Notably, DoorDash (NYSE: DASH) hit a high of $215.16 on 10 February 2021. Hence, DoorDash is a stable stock, but does it live up to the hype?
Perhaps, BACKLINKO estimates DoorDash is the most popular food-delivery app in the US with 57% of the market. DoorDash claims to have over 20 million active customers.
DoorDash claims to have delivered 816 million orders in 2020, BACKLINKO estimates. In the First Quarter of 2021, DoorDash deliver 329 million orders and processed $9.9 billion in gross order value. There were two million active DoorDash couriers serving over 45,000 merchants in the first quarter of 2021.
Is DoorDash a Consumer Monopoly?
Some observers will wonder if DoorDash (DASH) is close to Warren Buffett’s definition of a consumer monopoly because of its 57% market share. To explain, a Buffett consumer monopoly is a company that controls a large portion of a market through reputation or control of distribution.
Examples of consumer monopolies include Amazon (AMZN), Walmart (WMT), Kroger (KR) in many American grocery markets, and CocaCola (KOLA). For example, Kroger (NYSE: KR) controlled 47.9% of the grocery market in Cincinnati in 2020 and 34.8% of the Denver grocery market in 2020 through its King Soopers subsidiary, Chain Store Guide estimates.
Amazon generated 40.4% of US ecommerce sales in 2021, Insider Intelligence estimates. Moreover, Amazon (NASDAQ: AMZN) dominates some online sale categories such as books/music/video (83.2% of all US ecommerce sales in 2021) and computer/consumer electronics (50.2%).
Some consumer monopolies develop through infrastructure or distribution capabilities. For example, it will cost a fortune to replicate Amazon’s fulfillment centers, Walmart’s stores, or Kroger’s supermarkets. Meanwhile, CocaCola is a brand that everybody recognizes.
Amazon is a consumer monopoly because most people rely on it for certain products. Similarly, many families only shop for groceries at Kroger supermarkets.
Uncle Warren loves consumer monopolies because they generate steady streams of cash and can withstand almost any circumstances. Amazon and Kroger’s sales rose during the pandemic, for instance.
What is DoorDash?
Casual observers will note that DoorDash (DASH) has some consumer monopoly characteristics. Plus, DoorDash lacks Uber’s (UBER) controversy and drama.
There are some serious differences between DoorDash and Amazon and Kroger. Notably, Kroger controls the grocery market by owning the supermarkets, distribution networks, fulfillment centers, and even some food-processing plants. Amazon tries to dominate e-commerce by owning fulfillment centers, delivery services, stores, and freight airliners.
On the other hand, DoorDash relies on partners and contractors it has to pay: the couriers and merchants. Unlike Amazon’s fulfillment centers and Kroger’s supermarkets, those couriers and merchants can walk away from DoorDash at anytime. For example, a courier or merchant could go to GrubHub (GRUB) if GrubHub offers a better deal.
Hence, I do not consider DoorDash a true consumer monopoly. DoorDash is not a genuine consumer because anybody could duplicate its app. I also think app-based delivery is too new a business to have strong consumer loyalty. IE nobody is ordering DoorDash because mom ordered DoorDash when I was a kid. People shop at Kroger because mom and grandmother shopped there.
Does DoorDash make money?
Thus, we need to ask if DoorDash (NYSE: DASH) makes money? Strictly speaking, the answer is no.
On 30 June 2021, DoorDash reported no quarterly operating income and a quarter net loss of -$102 million. Moreover, DoorDash reported quarters of net losses during the pandemic. The last quarterly net income DoorDash reported was $23 million on 30 June 2020.
In contrast, DoorDash’s quarterly gross profit more than doubled over the past year. In detail, DoorDash reported a quarterly gross profit of $321 million on 30 June 2020 that rose to $644 million 30 June 2021.
Similarly, DoorDash’s quarterly revenues grew from $675 million on 30 June 2020 to $1.236 billion on 30 June 2021. Thus, DoorDash’s business is growing.
In fact, Stockrow credits DoorDash with three incredible quarters of revenue growth during the pandemic. DoorDash’s revenues grew by 225.5% in the quarter ending on 31 December 2020, 197.51% in the quarter ending on 31 March 2021, and 83.11% in the quarter ending on 30 June 2021. Stockrow does not provide revenue growth for earlier quarters.
How Much Cash Does DoorDash Generate?
No ending cash flow for DoorDash is available. However, DoorDash reported a quarterly operating cash of $262 million on 30 June 2021. The quarterly operating cash flow from $237 million on 30 September 2020.
DoorDash (DASH) borrows enormous amounts of money. DoorDash reported a quarterly financing cash flow pf $3.275 billion on 31 December 2020. DoorDash reported a quarterly financing cash flow of $6 million on 30 June 2021. Meaning DoorDash only paid off $6 million of its debt.
DoorDash reported a “net debt” of -$4.357 billion and a “total debt” of $321 million on 30 June 2021. The total debt fell from $606 million on 30 June 2020, while net debt grew from $1.005 billion on 30 September 2020. I suspect the net debt is the genuine debt number for DoorDash.
Yet, DoorDash can accumulate cash. It reported $4.668 billion in cash and short-term investments on 30 June 2021. The cash and short-term investments grew from $1.51 billion on 30 June 2020. Unfortunately, I think DoorDash borrowed much of that cash.
What Value Does DoorDash have?
DoorDash (DASH) is gaining value. For instance, DoorDash’s Total Assets grew from $2.694 billion on 30 June 2020 to $6.182 billion on 30 June 2021.
However, I see nothing in the financial numbers to justify the $210.37 Mr. Market paid for DoorDash on 10 September 2021. Consequently, I think all the value at DoorDash is theoretical, so I advise investors to stay away from it.
My advice for investors interested in food and retail delivery is to buy Kroger (KR). To explain, I think Kroger has the infrastructure to make money from meal delivery.
To elaborate, Kroger has 2,742 supermarkets in 35 American states in January 2021, Statista estimates. Many of those stores have kitchens and cafes that cook hot meals companies such as DoorDash can deliver. Moreover, Statista estimates that 2,223 Kroger stores support in-store pickup.
Is Kroger better that DoorDash?
Hence, DoorDash could deliver groceries, hot meals, and prescriptions from Kroger’s 2,255 in-store pharmacies. In addition, Kroger and Ocado Group PLC (LON: OCDO) plan 10 robotic fulfillment centers across the USA to support grocery delivery.
I think an obvious gangster move for Kroger is to buy Instacart, DoorDash (DASH), or GrubHub (GRUB). In contrast, the gangster move for investors is to buy Kroger (KR). Mr. Market paid $42.67 for Kroger on 10 September 2021, so it is cheaper than DoorDash.
Plus Kroger paid a 21₵ quarterly dividend on 1 September 2021. On 10 September 2021, Kroger offered a last-twelve months dividend of 75₵ and a 1.62% dividend yield.
Hence, I think smart investors will ignore DoorDash and buy Kroger.