DoorDash Has Already Peaked
Tags: Medicine, Generation, Life, Health, Safety

Its valuation doubled and then doubled again in an IPO bonanza. But is it just a well-timed flash in the pan?

Photo: Michael M. Santiago/Getty Images

In mid-2019, a private funding round valued DoorDash, the restaurant delivery service, at $12.7 billion. In early March 2020, with rumors that the company might go public, the New York Times noted Wall Street skepticism about that lofty figure, quoting one analyst who predicted DoorDash would take a “significant valuation haircut.”

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Instead, the company IPOed this week at a valuation of $39 billion — or $102 per share — and promptly saw its stock skyrocket, ending its first day as a public company worth $71.6 billion. (Domino’s, which revolutionized online food delivery and, unlike DoorDash, turns a consistent profit, is worth about $15 billion.)

What happened on the road from $12.7 billion to $71.6 billion was, of course, the onset of Covid-19 — and accompanying shutdowns and consumer skittishness about dining out — which turned delivery companies like DoorDash into “pandemic winners.” DoorDash’s revenue has increased sharply over 2019 and even showed its first profit in the second quarter of this year.

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But is the company really worth well over five times what it was just 18 months ago? After all, DoorDash promptly returned to posting a loss in the third quarter as shutdown restrictions eased. Being a pandemic winner obviously means that the revenue growth owes a lot to an anomalous circumstance — one whose end is in sight as vaccine timetables solidify by the day. A DoorDash exec told Axios Pro Rata that using its service is a sticky habit that consumers will continue so they can enjoy “extra time to do other things.” It seems more plausible that after months of takeout and deliveries, one “other thing” many of us would like to do is eat out at a restaurant for the first time in a year.

More strikingly, the underlying concerns that gave some analysts pause about DoorDash’s valuation before the pandemic haven’t actually changed. Critics charge that delivery services aren’t cheap for consumers, don’t pay drivers terribly well, cut into restaurants’ thin margins — and are still in the red. In short, they simply don’t seem to create much value in any direction. “It took a global pandemic to drive the firm’s one quarter” of profitability, a skeptical analyst told Markets Insider. And while the company has plans to expand its delivery service into other categories, such as groceries or retail goods, and is boosting a subscription membership, those experiments haven’t proven out yet.