DoorDash (NYSE:DASH) enjoyed a surge in popularity over the last year as restaurants were forced to close their dining rooms in the face of Covid-19. With even the most restrictive states beginning to open back up, though, that could have proved to be the end of DoorDash's fantastic run. New reports suggest that the company isn't resting on its laurels, and gained 9.6% in recent trading thanks to forward thinking and some solid-looking plans for 2021 and beyond. Better yet, the upward trend seems to be continuing into this morning, as of this writing.
2020 Was a Great Year for DoorDash
There's no doubt that DoorDash made hay while the sun shined, getting ahead on the strength of vastly increased interest in delivery produced by the closure of dining rooms. Yet with states reopening, vaccinations mounting, and a comparative end to the pandemic now in sight, what happens to places like DoorDash?
It seems that DoorDash understands this point about as well as any of us do, and has been looking to build a future in recent weeks. 2020 was very good to DoorDash, with 273 million orders taking place and representing an increase of 233% over 2019. Additionally, gross order volume staged a similar if slightly smaller increase, increasing to $8.2 billion, up 227% from 2019.
Restaurants were likewise happy with DoorDash, with 75% of same in a recent study noting that delivery through DoorDash allowed them to reach entirely new customer bases. Meanwhile, 65% of respondents in that same study found that they could actually increase profits thanks to DoorDash. With DoorDash now able to say that the odds of a restaurant staying in business are eight-fold better when working with DoorDash as compared to all US restaurants, that's some serious marketing firepower on its side.
Perhaps best of all for DoorDash, both Grubhub (NYSE:GRUB) and Uber Eats saw their market share—14% and 32% respectively—decline through 2020 as DoorDash seized at least some of said share.
Analysts Want to Be Convinced
While at first blush, it might seem like the broader analyst pool—as based on our latest research—is less than convinced that DoorDash can build a future post-Covid, there's a body of evidence that suggests it's closer to happening than may be expected.
Coverage on DoorDash goes back to January 2021, which isn't far at all, but within the coverage shows some slight uptick toward bullishness. January featured a ratio of five “buy” and 11 “hold” ratings, while March brought us to five “buy” and 13 “hold.” Today, however, the ratio stands at six “buy” and 14 “hold”.
As for the price target, the range is currently $135 to $210, with an average of $170.59. So far this year, five price target hikes have been seen, as analysts from Bank of America to DA Davidson are weighing in and expecting more performance out of DoorDash. It's worth noting, however, that all of the companies that have hiked prices either have no rating at all or are maintaining a “hold” or its equivalent.
A DoorDash Future
It would be easy to look at the market right now and suggest that normalcy will reassert itself as vaccine take-up rates climb and restaurants are actually allowed to function again, which will leave DoorDash in a bad position. After all, who needs delivery when you can go back to a dining room and eat in peace?
The answer to that largely rhetorical question, however, is “the same people who would rather work from home.” Delivery was never really an either / or proposition. People who enjoyed eating in dining rooms at restaurants also enjoyed eating that same food at home. For the most part, it's the same food; the people most truly impacted by dining room shutdowns were those who lived too far from restaurants to make carryout or delivery viable options.
DoorDash's competitors are already regrouping. Uber Eats, for example, recently staged new partnership efforts with Nimble, a prescription delivery company, that opens up medication delivery to Chicago and Atlanta. Yet DoorDash also expanded, connecting to several new convenience store chains to include such products in DoorDash's delivery options. DoorDash and Petco (NASDAQ:WOOF) recently staged a similar partnership. DoorDash even plans to launch a branded credit card, complete with rewards program, with offers from a range of banks and financial technology companies to back its use.
DoorDash is actively considering a future in which its primary trade, food delivery, will decline thanks to the reintroduction of restaurant dining rooms. By increasing the sheer number of items it will deliver, however, it should be able to make up a lot of its losses and make the pandemic-boosted levels of use closer to a new normal. Between this horizontal expansion and the proven success the company enjoys, that should make it attractive to most any small retailer. This smart move makes DoorDash more than worth considering for those looking to add to their portfolios.
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