DoorDash Earnings Show Rapid Growth: Why I'm Bearish Anyways

seekingalpha2021-02-26

Summary DASH reported strong triple-digit top line growth in its first quarter as a public company. The pandemic has created a perfect environment for food delivery companies, but DASH was still ...

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精彩评论

LEEQF
2021-03-01
LEEQF
Hi! Anybody can help comment here?
Yongshunn
2021-03-01
Yongshunn
UberEats is the worst
AbahAqo
2021-03-01
AbahAqo
Live it
- Eileena:
  yes!
nosferatu
2021-03-01
nosferatu
please like me
Sallyoo
2021-03-01
Sallyoo
J
cuteypie
2021-02-28
cuteypie
I agree

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At one point, DASH traded over 100% higher than its IPO price of $102 per share, and heading into its earnings report it still traded more than 60% higher. This past quarter showed phenomenal top-line growth and the company guided for 2021 to see further growth in spite of tough comparables. In spite of the insane growth it showed in 2020, DASH was not profitable on either a GAAP or non-GAAP basis.\nThat should spook investors as other tech names that benefited from the pandemic saw huge boosts to profitability. DASH might eventually be able to report profits as it gains scale, but the lack of profitability in 2020 suggests that operating leverage may prove difficult to come by. I am bearish on the stock at current valuations.\nBlockbuster Top Line Growth, No Profits\nDASH saw its network report strong growth of 87% year over year for marketplace partner stores and 158% year over year for drive partner stores. Marketplace partners stores are those that show up in theDoorDashapp and Drive Partner stores are those which use their own website but rely onDoorDashto fulfill delivery:\n(2020 Q4 Shareholder Letter)\nDASH reported blistering 226% revenue growth in the quarter and 226% revenue growth for the full year:\n(2020 Q4 Shareholder Letter)\nForgive me for stating, but as the reader probably knows, DASH’s line of business is in food delivery. The pandemic created a perfect environment for this business segment, as social distancing restrictions essentially made food delivery the “only option” for many restaurants. In spite of this perfect environment, DASH was nonetheless unable to show GAAP profitability:\n(2020 Q4 Shareholder Letter)\nEven if we add back stock-based compensation, DASH was barely able to generate $10 million in adjusted net income for the fourth quarter and lost $139 million in adjusted net income for the year. Consider that Zoom (ZM), another pandemic beneficiary, generated 25.5% GAAP net margins in the third quarter. Shopify (SHOP) generated 12.7% GAAP net margins in its latest quarter. Why is DASH unable to generate profits during what might prove to be a peak year?\nDASH discloses a metric called “contribution profit” which, as we can see below, is only 23.7% of revenues:\n(2020 Q4 Shareholder Letter)\nDASH defines Contribution Profit in itsS-1as follows:\n\n “We define Contribution Profit (Loss) as our gross profit (loss) less sales and marketing expense plus (i) depreciation and amortization expense related to cost of revenue, (II) stock-based compensation expense included in cost of revenue and sales and marketing expenses, and (III) allocated overhead included in cost of revenue and sales and marketing expenses. Gross profit (loss) is defined as revenue less (i) cost of revenue, exclusive of depreciation and amortization and (II) depreciation and amortization related to cost of revenue.”\n\nIt is the following statement (also from the S-1) that leads me to believe that contribution profit is a better proxy for gross profit as typically used by other companies:\n\n “We believe that Contribution Profit (Loss) is a useful indicator of the economic impact of orders fulfilled through DoorDash as it takes into account the direct expenses associated with generating and fulfilling orders.”\n\nWhat does this all mean? The traditional meaning of gross profit is meant to represent the incremental profit from each dollar sold by the business. DASH’s contribution profit can be considered to be its true gross profit because it takes into account, among other things, the sales and marketing expenses associated with each sale. The typical tech company that I cover has gross profit margin upwards of 65%. There, the high gross margin suggests that operating leverage may eventually pave the way for strong profits in the future, even if the companies are not currently profitable. DASH’s contribution profit margin is a mere 23.7%, suggesting that the path to profitability will bemuchharder than tech peers.\nDASH guided for this upcoming year to see Marketplace GOV of $30 billion to $33 billion, up 28% from $24.7 billion in 2020. I estimate this to equate to roughly $3.7 billion in revenue. At recent prices, DASH trades at 17 times forward revenues, which is rich but at first not obviously bubbly in light of the 28% growth rate. However, price to sales is meaningless for DASH because of its low gross margins. I estimate that DASH will earn $877 million in contribution profit in 2021.\nDASH trades at 73 times that number, which makes no sense in comparison to the 23.7% growth rate. It is very rare to see tech companies (with high gross margins) trading at a price to sales multiple even equivalent to their growth rate. I consider such multiples to be bubbly. Yet DASH would trade at $54 per share if it traded at 23.7 times forward contribution profits. Shares have 70% downside to that price.\nConclusion\n2020 was a year in which many tech stocks proved the naysayers wrong. Wall Street appears to have become comfortable purchasing stocks of unprofitable tech companies because operating leverage may lead to high profits in the future. Not all tech companies are created equal - DASH’s low effective gross margins suggest that on a comparable basis, its valuation is much more expensive than it looks.\nEven if all the projected contribution profit growth flows directly to the bottom line, then DASH would still earn only $75 million in adjusted net income (that’s after excluding stock-based compensation). Shares trade at 746 times that number. While I am in general comfortable with paying a fair multiple for high quality tech companies, DASH appears to be the poster child of the tech bubble.","kind":"news","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":362006256,"gmtCreate":1614569610375,"gmtModify":1703478302758,"author":{"id":"3572235673675008","authorId":"3572235673675008","name":"LEEQF","avatar":"https://static.tigerbbs.com/ead66a2c538631d15658309f808c7d40","vip":1,"crmLevel":3,"crmLevelSwitch":0,"idStr":"3572235673675008","authorIdStr":"3572235673675008"},"htmlText":"Hi! Anybody can help comment here?&nbsp;","listText":"Hi! Anybody can help comment here?&nbsp;","text":"Hi! Anybody can help comment here?","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://laohu8.com/post/362006256","repostId":1100894452,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":366743287,"gmtCreate":1614567336149,"gmtModify":1703478272902,"author":{"id":"3573619902166819","authorId":"3573619902166819","name":"Yongshunn","avatar":"https://static.tigerbbs.com/9012fdd920e4fb2d023488613b795275","vip":1,"crmLevel":5,"crmLevelSwitch":0,"idStr":"3573619902166819","authorIdStr":"3573619902166819"},"htmlText":"UberEats is the worst","listText":"UberEats is the worst","text":"UberEats is the worst","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://laohu8.com/post/366743287","repostId":1100894452,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":366715860,"gmtCreate":1614563074050,"gmtModify":1703478211899,"author":{"id":"3577656206158359","authorId":"3577656206158359","name":"AbahAqo","avatar":"https://static.tigerbbs.com/11938790957e3b9e0081f89fecec5792","vip":1,"crmLevel":1,"crmLevelSwitch":0,"idStr":"3577656206158359","authorIdStr":"3577656206158359"},"htmlText":"Live it","listText":"Live it","text":"Live it","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":1,"repostSize":0,"link":"https://laohu8.com/post/366715860","repostId":1100894452,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":3685573,"gmtCreate":1614566225990,"gmtModify":1635760103314,"authorId":3572401971897760,"author":{"id":3572401971897760,"idStr":"3572401971897760","authorId":3572401971897760,"name":"Eileena","avatar":"https://static.tigerbbs.com/42d6aa9db75086eec89c4393abd90c98","vip":1,"crmLevel":3,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":366715860,"type":1,"supId":0,"prevId":0,"content":"yes!","text":"yes!","html":"yes!"}],"langContent":"EN"},{"id":366711214,"gmtCreate":1614562796038,"gmtModify":1703478206818,"author":{"id":"3573969380135724","authorId":"3573969380135724","name":"nosferatu","avatar":"https://static.tigerbbs.com/87ad6e123460802cc5d376214269cd69","vip":1,"crmLevel":2,"crmLevelSwitch":0,"idStr":"3573969380135724","authorIdStr":"3573969380135724"},"htmlText":"please like me","listText":"please like me","text":"please like me","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://laohu8.com/post/366711214","repostId":1100894452,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":366445281,"gmtCreate":1614557997643,"gmtModify":1703478143799,"author":{"id":"3575444016531170","authorId":"3575444016531170","name":"Sallyoo","avatar":"https://static.tigerbbs.com/41b2ed5423d3f03bc394c43d718c92cd","vip":1,"crmLevel":2,"crmLevelSwitch":0,"idStr":"3575444016531170","authorIdStr":"3575444016531170"},"htmlText":"J","listText":"J","text":"J","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://laohu8.com/post/366445281","repostId":1100894452,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":366574990,"gmtCreate":1614525795110,"gmtModify":1703478019594,"author":{"id":"3546519093286207","authorId":"3546519093286207","name":"cuteypie","avatar":"https://static.tigerbbs.com/324f57345522368552a82de3cf71ed5f","vip":1,"crmLevel":6,"crmLevelSwitch":0,"idStr":"3546519093286207","authorIdStr":"3546519093286207"},"htmlText":"I agree&nbsp;","listText":"I agree&nbsp;","text":"I agree","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://laohu8.com/post/366574990","repostId":1100894452,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":132,"commentSize":30,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; 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