DoorDash Earnings: Network Effect Is Driving Strong Top-Line Growth and a Path Toward Profitability

Product improvements such as more restaurant and non-restaurant options and increased on-time deliveries have helped strengthen DoorDash’s DASH network effect, which shows up as growth in the number of orders and the average order size. The firm also stated that monthly active users increased by a double-digit rate from last year, which helped attract more high-margin ad dollars. Declining consumer and courier acquisition costs also show an improving network effect, all of which helped expand the adjusted EBITDA margin for the fourth consecutive quarter. We have raised our projections but are maintaining our $155 fair value estimate. We continue to view the stock as attractive. DoorDash’s third-quarter results also likely indicate a strong third quarter for Uber’s delivery segment.

Gross order value increased 24% year over year to $16.8 billion. The take rate increased 30 basis points to 12.9%, likely helped by continuing growth in advertising revenue, which resulted in net revenue of $2.2 billion, up 27%.

The operating loss of $108 million was an improvement from a loss of $308 million last year mainly due to net revenue growth. Continuing improvement in logistics and lower courier acquisition costs improved GAAP gross margin by 130 basis points to 46.6%. Lower consumer acquisition costs along with continuing overall expense management reduced sales and marketing, research and development, and general and administrative costs as a percentage of net revenue compared with last year. Adjusted EBITDA increased to $344 million (2% of gross order value) from $87 million (0.6% of gross order value).

Management guided for fourth-quarter gross order value between $17 billion and $17.4 billion or 19% growth at the midpoint. The firm also expects adjusted EBITDA of $320 million-$380 million, which at the midpoint implies a 2% margin as a percentage of gross order value, higher than last year’s 0.8%.