Hungry for Growth, Starving for Profits?

Doordash. 

Doordash was founded in 2013 by Tony Xu, Andy Fang, Stanley Tang, and Evan Moore. The company began as a local delivery service named Palo Alto Delivery. Doordash quickly evolved into a national force in the on-demand logistics and food delivery industry, redefining how consumers access meals, groceries, and essential goods. Doordash leverages technology to build its ecosystem that connects consumers, merchants, and independent contractors known as dashers. Since its IPO in 2020, Doordash has rapidly expanded into broader markets serving over 30 countries and has expanded its to local commerce, grocery, convenience, alcohol, and pharmaceuticals. 

Doordash’s strategic vision is built on four foundational pillars that will hopefully position itself as more than just a food delivery service but as a technology-driven commerce platform. These pillars include expanding beyond restaurants, optimizing last-mile logistics, international market expansion, and monetizing the platform. Doordash has invested heavily in advanced AI driven dispatch and route optimization to enhance efficiency, reducing delivery times while increasing courier utilization. They are also active in 30+ countries, with Europe and Asia expected to be key growth drivers with its recent acquisition of Wolt. Doordash also has successfully been able to monetize its platform with its advertising business, which enables restaurants and consumer brands to drive targeted market campaigns, along with its explosive growth from Dashpass memberships. 

Doordash has been makin' moves as of recent. They recently posted their first full year of GAAP profitability in 2024, a major milestone marking its shift from a cash-burning shitco to a sustainable enterprise. This was driven by its surge in advertising revenue, with 21 of the top U.S. consumer packaged goods brands taking advantage of the Doordash ad platform. Its revenue also grew to $10.7 billion in 2024, up 25% year over year. Doordash’s global consumer adoption also saw a major jump, with over 42 million active users and a growing international footprint. 

Doordash represents a major investment opportunity due to its technological innovation and expansion into high-growth vertices. They are no longer a simple food delivery company but an AI powered logistics platform that facilitates all sorts of local commerce. Doordash maintains the largest market share in the food delivery sector and is rapidly expanding into grocery and retail delivery. The U.S. alone represents a massive $5 trillion market (TAM) that spans food, grocery, retail, and logistics services and Doordash is well positioned to capture a significant share in the lazy bum sector. Its strong network effects and brand equity are driven by a combination of merchant loyalty, growing consumer engagement, and improved courier economics, making it harder for competitors to eat its lunch. 

The bad boys over at Capital Group have chosen to analyze Doordash because it is at an inflection point, after years of hypergrowth fueled by aggressive expansion and VC dollars. The company has now proven its ability to generate profits while continuing to scale. However, the food delivery and logistics space remains highly competitive and subject to regulatory risks. This makes it an excellent target for the bad boys to analyze. 

Doordash has continued to grow its revenue at an impressive rate, in 2024 they reported $10.7 billion in revenue which was 24% higher than the year prior. More importantly, the company was able to achieve its first full year of profitability fueled by an increase in orders and higher earnings from advertising. In 2024, Doordash was also able to improve its gross margin to 47%, a slight increase from the year prior when they reported a gross margin of 44%. While profitability is improving, one important number to watch is stock-based compensation which remains high. It is estimated that they will spend  $1.2 billion on SBC in 2025, which will reduce overall earnings. 

Since Doordash recently became profitable its PE ratio is very high compared to more established companies at 699. This is very high, meaning investors are expecting high growth in the future are are willing to pay a premium for the Doordash. Doordash currently trades at a P/B ratio of 8.5, while Uber trades at a 5x and traditional logistics companies trade in the 2-4 range. This reflects investor confidence in Doordash’s ability to expand beyond delivery into broader local commerce and logistics. Despite its absurd valuation, Doordash remains attractive to investors due to its strong revenue growth, improving profitability, and expansion into high-margin businesses like advertising. 

In 2024, Doordash produced $2.1 billion in operating cash flow, an impressive 27% increase from 2023. They also were able to boast an impressive free cash flow of $1.8 billion up 34% YoY. This is some good stuff, enabling Doordash to fund its growth instead of relying on outside investors. With this strong cash flow, Doordash has decided to ‘return’ value to shareholders by announcing a $5 billion stock buyback program. This may signal confidence to some or stupid to others, the ACG boys think they should keep reinvesting those funds instead of buybacks. Overall, Doordash is in a much stronger financial position than in previous years. 

The global online food delivery market was valued at over $150 billion in 2023 and is expected to exceed $200 billion by 2027. The on-demand industry and local commerce industry have evolved rapidly over the past decade, expanding beyond restaurant delivery into a broader range of goods and services. The industry can be broken down into several key segments that include restaurant, grocery and convenience, retail and specialty goods, quick commerce, and white label and business-to-business delivery. Restaurant delivery is the largest and most established segment with key players including Uber Eats, Just Eat Takeaway, Grubhub, and Deliveroo. The grocery and convenience delivery segment is also a fast-growing segment that gained traction during the pandemic. Many grocery chains are also developing their delivery services to compete in this space. Growth in these segments has been driven by shifting consumer expectations, improvements in logistics technology, and increased merchant adoption of digital sales channels. 

Several economic and technological factors are shaping the growth of the delivery and local commerce industry. Key industry drivers include the rise of the on-demand economy, urbanization and demographic shifts, technological advancements, regulatory pressures and labor policies, and the shift towards subscription and loyalty programs. As more people live in dense metropolitan areas, demand for same-day and rapid delivery services continues to rise. Younger generations prioritize digital-first shopping experiences over traditional in-store shopping. Membership-based delivery models, such as Uber One, Instacart+, and Walmart+ are gaining traction as these programs encourage repeat usage and customer retention while creating predictable revenue streams. Despite these growth drivers, challenges such as fuel costs, delivery workforce shortages, and increasing competition are pushing companies to streamline operations and expand their service offerings to maintain profitability. 

The industry is undergoing rapid technological transformation with companies leveraging AI, automation, and alternative delivery methods to gain traction and improve customer experience. Several companies have begun to experiment with self-driving delivery vehicles, drones, and sidewalk robots to cut labor costs and improve scalability. Many restaurants are shifting to delivery-only models, utilizing ghost kitchens to cut costs and serve more customers. Regulatory pressure and consumer demand are driving investments in electric delivery vehicles, biodegradable packing, and carbon-neutral initiatives that will reduce emissions and waste in markets where sustainability is a priority. The combination of automation, AI-powered logistics, and alternative delivery methods will define the next decade of the industry, leading to faster, cheaper, and more efficient services. 

Changing consumer preferences and generational shifts are shaping how the on-demand economy is evolving due to health and wellness trends, economic pressures, shifts in shopping habits, and lifestyle changes. The demand for organic, plant-based, and health-focused food delivery is rising. Also while convenience is a key factor, rising inflation and economic uncertainty are making cost a bigger consideration. The increase in remote and hybrid work has altered demand patterns, this leads to more people ordering weekday lunches, grocery meal kits, and convenience items online, leading to a shift in delivery volume away from traditional dinner rush hours. Companies that can successfully navigate labor challenges, integrate AI-powered efficiencies, and expand into high-margin vertices will be the ones to rule them all.  

The on-demand delivery industry is highly competitive, with players fighting for market share in food delivery, grocery delivery, and last-mile logistics. Doordash has positioned itself as the largest food delivery platform in the United States with a 65% market share, well ahead of Uber Eats (25%) and Grub Hub (10%). Doordashs initial growth was fueled by partnerships with national chains, it has increasingly targeted grocery, convenience, and retail merchants to expand its addressable market. Beyond food delivery, Doordash has begun to compete in last-mile logistics. In this segment, Doordash competes with Amazon, Instatcart, and other traditional courier services like FedEx, and UPS in the fast-moving local delivery space. 

Doordash’s revenue is driven by two main products, its Doordash marketplace and advertising and subscription revenue. The Doordash marketplace is the company’s core business, where customers order from merchants and Doordash earns a commission on each order as well as from fees paid by customers. Dashpass is the company's subscription service, providing unlimited free deliveries for a monthly fee. Dashpass currently has over 22 million members, creating a strong customer base with high order frequency. Doordash Ads also allow merchants to promote their products within the app, driving additional high-margin revenue. Doordash marketplace currently accounts for a majority of the company's revenue, advertising and subscriptions are growing and will likely be the company's long-term profit engine. 

The food and last-mile delivery market is fragmented, with different competitors leading in different regions and service areas. Doordash is the largest U.S. food delivery player with a 65% market share thanks to its expanding services into grocery and retail segments. Followed by Uber Eats with 25% as they have a strong global footprint that is integrated with Uber’s rideshare network. Grubhub has a 9% market share, which has been declining. Then there is Instacart, Amazon Fresh, and GoPuff with all very small market shares currently but could grow in their respective segments. While Uber Eats is Doordash’s primary competitor, it has a much larger global presence whereas DoorDash dominates the U.S. food delivery segment. 

Doordash has built a strong moat that protects it from competition, as it benefits from several key advantages that include network effects, customer loyalty, advertising monetization, and last-mile logistics expertise. The more merchants that join Doordash, the more valuable the platform becomes for customers. Also as order volume increases, Doordash can improve courier efficiency, reduce delivery times, and lower costs to make it harder for competitors to match. Doordash has built a strong loyal audience that is highly engaged in the United States with its Dashpass creating a sticky user base with high repeat usage. Doordash has built one of the most efficient AI powered logistics networks, allowing for faster delivery times and cost optimization. 

Doordash organic revenue has been driven and accelerated by its business expansion, new product launches, and operational efficiency improvements.  Doordash has added over 100,000 non restaurant merchants in the past year which has increased their order frequency and basket size. The company's subscription revenue is stale with over 22 million subscribers, this is predictable recurring revenue that increases customer retention. Doordash has also begun leveraging its logistics expertise to offer delivery services directly to merchants under their own brand names. This b2b segment could compete with traditional last-mile carriers like FedEx, UPS, and Amazon. Doordash also utilizes AI to optimize routing, reduce delivery times, and lower costs to optimize efficiency. 

Doordash has been very active in the M&A space over the past few years, utilizing strategic acquisitions and partnerships to expand its global reach, enter new verticals, and improve its technology infrastructure. In 2019 Doordash acquired Caviar from Square, which expanded its reach into premium restaurant delivery and built exclusive partnerships with high-end restaurants. In 2021 they acquired Chowbotics, an automated food preparation and robotics company. Then in 2022, Doordash acquired Wolt, which expanded Doordashs footprint into 23 international markets including key regions in Europe in Asia.  In the future Doordash could look to acquire regional grocery delivery services, AI and automation technology, and competitors in Latin America, The Middle East, and Southeast Asia to accelerate international expansion. Doordash has shown a willingness to make large, high-impact acquisitions that will likely focus on expanding its global market share and improving delivery efficiency.

Several factors could accelerate Doordashs growth in the near term including faster delivery and supply chain optimizations, generative AI customer service, fleet expansion, legal wins, and global expansion. Wolt has given Doordash a major presence in Europe and Asia, and seamless integration of technology, logistics, and merchant networks that will open new growth opportunities. Doordash has begun partnering with EV companies for adoption that could lower delivery costs and position DD as a leader in sustainable logistics. AI-powered chatbots, personalized order recommendations, and dynamic pricing models could improve user engagement and order frequency. Doordash has also made investments in micro fulfillment centers, ghost kitchens, and AI-powered logistics to reduce delivery times and increase customer satisfaction. 

The global online food delivery market is projected to exceed $200 billion by 2027 and the last-mile delivery market is expected to grow to $600 billion by 2030. As consumer habits shift towards digital ordering, the market for delivery services will continue to expand. Doordash has significant growth potential in emerging markets, where mobile ordering adoption is rising and e-commerce infrastructure is improving. Investing in ghost kitchens / dark kitchens, micro-fulfillment, and automated packing solutions could help reduce costs and delivery solutions. Also as competition intensifies, companies that can offer the faster, cheapest, and most reliable services will eat market share. 

Doordash faces several operational risks that could affect its long-term success including its ability to manage costs and efficiency of its operations, reliability, and accuracy of delivery services, and its technology infrastructure. With rising fuel prices, driver shortages, and higher wage demands from delivery personnel the ability to maintain affordable delivery fees can be difficult. Also, late deliveries, incorrect orders, or problems with quality can damage Doordash’s reputation. Additionally, a major outage, cybersecurity breach, or issues with its app could significantly disrupt operations leading to damaged customer trust and impact revenues. 

The delivery industry, especially companies that utilize gig workers has faced increased scrutiny from regulators, antitrust investigations, and changing regulations on consumer protection laws. Changes in employment laws especially in large markets like California and Europe, could increase Doordash’s operating costs significantly. Regulators might impose restrictions on commission fees or pricing practices that could limit the company’s profitability. Lastly, any new legislation requiring stricter data handling, transparency around pricing, or data protection measures could lead to increased operational costs, and negatively affect the company's growth. 

Doordash operates in an extremely competitive market where it faces constant pressure from major players like Uber Eats, Instacart, Walmart+, and Amazon Fresh. While unlikely due to its scale, new local market participants could further increase competitive pressures due to better user experiences and cheaper costs. Additionally, consumer loyalty can be volatile as consumers aren’t loyal to a company they are loyal to availability and convenience. Also, Doordash’s valuation makes them vulnerable to any slowdown in growth or unexpected financial challenges.  Any decline in order volume, increase in operational costs, or failure to scale into new verticles could quickly reverse profitability gains and hurt the company’s financial health. 

Doordash has established itself as a dominant player in the food delivery and local commerce industry, holding a whopping 65% market share. The lads reported an impressive $10.7 billion in revenue and became profitable for the first time in 2024. The company expanded its product line to grocery, retail delivery, and advertising. Doordash has built an impressive brand with over 22 million Dashpass subscribers. Its AI-driven logistics capabilities provide a competitive edge, positioning Doordash to further scale efficiently and sustainably. Also, strategic acquisitions like Wolt have enabled Doordash to have a global presence to create even more opportunities for long-term growth. 

The bad boys over at Azar Capital Group will be giving  Doordash a ‘HOLD’ rating. At its current valuation, the company is trading at a significant premium, reflecting high expectations for future growth. New investors should approach cautiously, awaiting clearer signals of sustainable profitability and successful expansions into nonrestaurant markets. While Doordash has historically delivered strong financial results, it faces intense competition, regulatory challenges, and the high cost of stock-based compensation. However, long-term investors should keep an eye on accelerated margin expansion, regulatory clarity, competitive positioning, and continued technological innovations. 

Disclosure

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