DoorDash Earnings Preview: Can Delivery Growth Keep Accelerating?

Profit Back, Scale Up … Now What?

• DoorDash reports earnings after market close tomorrow.
• Its stock is up over 50% this year and over 400% since the beginning of 2023.
• The company acquired UK delivery giants Deliveroo and SevenRooms this quarter, and investors are eager to hear about their integration and their impact on margins.

DoorDash (DASH) is having an amazing year and its stock is up over 50%, thanks to smart acquisitions and cost cutting. The company is slated to report Q2 earnings tomorrow after the bell, and everyone is asking the same question: Can it keep up the momentum?

What Wall Street is modeling for DoorDash

Consensus analyst estimates call for an earnings per share (EPS) of $0.43 from DoorDash, a sharp contrast to the -$0.38 reported just one year ago in Q2 FY2024. Consensus revenue estimates indicate a similar turnaround, coming in at $3.16 billion, which would equate to more than 20% growth year-over-year. 

In Q1 of this year, DoorDash reported $3.03 billion in revenue on an EPS of $0.44, marking a return to profitability while slightly missing revenue expectations. Despite the miss, these revenue numbers still constituted 22% growth year-over-year (YoY); analysts expect that trend to continue into this quarter. 

Delivery expansion, DashPass and acquisitions

While DoorDash is up over 50% this year and over 400% since the start of 2023, numerous catalysts could continue to push the delivery giant to higher highs. The newest of this bunch is DoorDash’s all cash acquisitions of UK delivery giants SevenRooms and Deliveroo, which cost $5.1 billion in total. 

Continued growth of these merchant integrations would signal success in DoorDash’s international expansion efforts and could fuel an increase in share price. Another sector where investors will look for continued growth is DashPass subscriptions; increased subscriber counts facilitate higher take rates, which lead to improved margins. 

Beyond these two categories, Wall Street will have ears open for DoorDash’s Marketplace gross order value (GOV) numbers, which are projected between $23.3 billion and $23.7 billion, with strong traction in food, grocery, alcohol and advertising offerings. If DoorDash’s GOV falls within or above this range, that would create a further bullish case for the company. 

Growth slowdown, margin pressure and acquisition drag

While DoorDash has the propensity to propel itself higher with this report, a number of factors could stifle its meteoric rise. The most glaring is decelerating growth of revenue, where it already missed expectations in Q1. Two consecutive misses could solidify the idea that revenue growth is slowing down. 

Internal expansion and recent acquisitions could also pressure DoorDash’s short-term margins and draw regulatory scrutiny; for instance, the Deliveroo deal is still under review by the UK's Competition and Markets Authority (CMA). While such regulatory scrutiny may not actually impede the company’s growth in the long-term, scrutiny of any sort always breeds uncertainty, and uncertainty is never bullish. 

Besides, competition in food delivery remains fierce, particularly from Uber Eats. If DoorDash’s numbers indicate competition is increasing and could cap market share gains and take rates, it could hurt the share price. 

Is DoorDash priced to perfection?

Based on analyst sentiment, there’s a good chance DoorDash is a little inflated headed into tomorrow’s earnings report. Analysts’ average one-year price target is $229, well below the $250-$260 range where the stock is trading. 

DASH has been making all-time highs almost daily since the beginning of June and, generally, all-time highs bring all-time resistance. But the stock has never taken a prolonged breathing period in this two month run. 

Plus, DASH handsomely beat EPS estimates and narrowly missed revenue targets in Q1, a setup which would usually yield no change to or a slight increase in share price. But slid over 15% in the following two days. 

This shows the market is sensitive to DoorDash’s execution and forward outlook, which is not inherently bearish, but should serve as a warning to anyone planning trades based on analyst expectations for DoorDash this quarter. 

While this bearish case sounds compelling, price action and analyst sentiment aren’t everything — Morgan Stanley told the public that Apple (AAPL) had no upside at $13 per share in 1997. DoorDash very well could come in with a beat-and-raise scenario, which would no doubt push it to higher highs. 

I personally used DoorDash more this quarter than ever before; perhaps there are hundreds more out there in the same boat, and this is only the beginning of the company’s rise to dominance in the food delivery. 

Gus Downingis host of the tastylive Network show Risk and Reward. @GainsByGus

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