Friday, April 12, 2024

DoorDash Shares Tumble 7% Despite Strong Revenue Growth

Wall Street was left scratching its head when DoorDash Inc.’s stock, one of the frontrunners in the food delivery sector, fell in after-hours trading, despite its robust financial performance. 

This development is an outlier in the existing market landscape, challenging the typical correlation between healthy revenue growth and positive stock performance.

In the following analysis, we delve into DoorDash’s recent financial health, the unexpected market response, and expert opinions from Wall Street. 

Breaking Down the Figures

Credits: Business Insider

In the fiscal fourth quarter, DoorDash reported a net loss of $154 million (or 39 cents a share). This seems stark, however, it is significantly less compared to the net loss of $640 million (or $1.65 a share) recorded in the corresponding quarter of the previous year.

The highlight of the announcement was the company’s revenue growth. Figures skyrocketed by 27%, raising the bar from $1.82 billion in the same period of the preceding year to a staggering $2.3 billion.

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The Mystery of the Market’s Reaction

The company’s gross order value (GOV), the total monetary worth of all orders made on its platform, increased 22% to $17.64 billion, defying expectations. FactSet analysts had predicted a figure much lower – about $17.3 billion.

The numbers paint an image of significant progress at DoorDash

Yet, the question arises: what drove the stock to drop by approximately 7% in after-hours trading on the day the earnings were disclosed?

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Analysts’ Take

DoorDash Revenue
Credits: Yahoo Finance

Analysts had anticipated a net loss of only 13 cents a share on revenue of $2.25 billion. 

The higher than expected net loss contrasts with the optimistic outlook generated by the increased GOV and revenue growth, sparking negative investor sentiment.

“The figures indicate substantial growth, but it’s important for the market to see the company reduce its net loss significantly”, said a senior Wall Street analyst, who wished to remain anonymous. 

“Investors anticipate that healthy revenue boosts should lead to better bottom-line figures.”

Looking Ahead

DoorDash optimistically projected first-quarter GOV of $18.5 billion to $18.9 billion. Consequently, analysts are curiously watching to see if the company will hit its mark once again and perhaps correct its net loss following this unsettling report.

Despite the recent tumble, DoorDash shares have surged 89% over the past 12 months while the seismograph of the market, the broader S&P 500 index, has only increased by 23%. 

The robustness of the stock in the face of market variability means that while DoorDash may have lost a few steps this time around, it’s definitely not out of the race.

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