The score will take care of itself ~ Bill Walsh

11ish Investing

Should You Invest in DoorDash Right Now

 

If you didn’t know, DoorDash is a food, alcohol, and grocery delivery service. It has been incredibly handy during COVID. It was already growing explosively prior to the IPO, for years. I LOVE DoorDash as a concept and there are many reasons why you should consider investing in it. But I will also highlight legitimate risks & concerns so that you can look at this opportunity in a balanced investor perspective. Lastly, I will share with you what I’d personally do.

 

 

The positives

  • They are making 1.9 billion in revenue and are losing only 150M in the same period. With 1 million Dashers and 18M customers, that is an INCREDIBLY profitable. Furthermore, I honestly believe that it will only get better from here because just like remote productivity, COVID isn’t going away and people are continuing to find ways to improve and enrich their lives.
  • DoorDash owns between 30 to 50 percent of the market share, depending on your source and their optimism.

– It is a new era for foodies. You get to try so many types of food without the fear of being publicly judged or feeling awkward about local customs of the restaurant’s theme. Fun fact, I drank the Vietnamese spring-roll sauce at a restaurant because they gave it to me in a lemonade pitcher….. 

– I use DoorDash because i honestly think they have the better solution, compared to its North American competitors. It is not without issues, but search, reviews, and food tracking is all very well thought out so that you never really feel stuck and you always see progress for your food delivery. After you use it a few times, it’s pretty easy to get hooked if you have that kind of disposable income.

 

Risk:

  • There are a LOT of competitors. The biggest to name is Ubereats, for the obvious deep pockets. The other whale in the room is the fact that there are a ton of food delivery companies overseas with even deeper pockets, so you have to think about how much growth opportunity is left in the long term both within the US and internationally. 
  • Price wars. It’s in my opinion inevitable. We’ve reached so much competition that SoftBank came in. That to me is an indication that a lot of money is needed to move forward at this point.
  • Just like the fact that most neighborhoods always end up with new restaurants and food ideas, I truly believe that there is always opportunity for growth, BUT I expect explosive growth stopping soon and at that point, then what? Did they name themselves doordash and not fooddash because they foresaw this and would like to dive into delivering other things? They’ve already partnered with We’ll see! 
  • Those restaurants who can will and have started going direct, because DoorDash does charge cutting into DoorDash’s bottom lines

 

My personal approach

 

  • With all IPOs, I hold off on IPO week and wait to see how market reacts first. Depending on the overall sentiment, I will invest as though it’s a risky investment, because i know there will be a 6 month cliff where employees will probably start selling to collect their windfall. After 6 months, I will reevaluate, depending on their earnings releases for those 2 quarters.
  • IPOs historically means a drop. If you can’t wait, but some. If you want to avoid unnecessary risk, I’d recommend that you wait for 2 quarters before investing.

 

https://www.ft.com/content/d47d875d-bf7f-4527-a879-a3f33761c78f

 

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