DoorDash Outperforms Despite Losses - Is It Time To Buy?

On the heels of stronger orders, than they expected, DoorDash NYSE: DASH stock jumped nearly 12% in premarket trading on Friday, last week, even as the quarterly loss was wider than they expected. Apparently, customers are still willing to spend more money on delivery food as prices continue to rise.

This has resulted in a current share value of $54.55 with a new price target of $114.90. With the next reporting date not until late in February, DoorDash has to climb to get there.

Success Relies on Knowing When – And How – To Pivot

Still, DoorDash has made some impressive choices in the past month or so, particularly in regard to expanding its vision. In October, the delivery company made a few key pivots that would definitely improve its long-term outlook. For one, they added the “Drinks with DoubleDash” program that allows users to add various kinds of alcohol to their order.

They also responded to the Call-to-Action issued by the White House and partnered with Walgreens in an effort to improve access to COVID-19 treatments, particularly for the most vulnerable communities.

Similarly, they partnered with Tractor Supply to offer on-demand delivery from nearly 2000 stores across the country. While this may seem like a very niche, minority market to tap into, let's remember that DoorDash only works if food can be produced. So improving their farming outlook could also be a smart avenue for them as well.

Earnings Drag But the Stock is Young

DASH has a current EPS of -$0.55 on sales of $1.8B. At first glance, DoorDash earnings might not appear like much but they only went public at the end of 2020. This explains why their first year's earnings seem completely out of whack: reported earnings of -$7.39 did not even come close to the estimated range low of -$0.13. While the range high and consensus estimate were both positive—$0.45 and $0.20—the massive miss is not entirely unexpected.

For 2021, the annual numbers were more reasonable. While the reported earnings missed the -$1.35 range low by only 4 cents, this metric was far closer to expectations.

Looking closely at the last four quarters—about half the stock's life—the margins are far more reasonable. Closing out 2021, for example, the reported earnings of -$0.45 failed to meet the range low—also be only 4 cents—but by Q1 of 2022, earnings had recovered a little: while -$0.48 did not meet the estimate it did best the range low.

Unfortunately, reported earnings for Q2 slipped below the range again, missing the low estimate of -$0.56 by 16 cents. Earnings recovered a bit, again, in Q3: the report satisfied the range low of -$0.77.

Rising Sales Suggest There is More to Come

While earnings are a bit all over the place, DoorDash can actually celebrate pretty consistent sales. In both 2020 and 2021, for example, sales met the consensus estimate ($2.9 billion and $4.9 billion, respectively). This indicates that not only are sales consistent, they are improving dramatically.

Quarterly sales look even better than their annual counterpart. In Q4 of 2021, sales met of $1.3 billion met the estimate, which was the perfect median for the $1.2 to $1.4 billion range. However, sales for the following three quarters beat the estimate by satisfying the top of the range. Furthermore, sales increased for these three consecutive quarters, to 1.5, 1.6, and 1.7 billion.

The Struggle is Real...and Broad

But despite DoorDash's best efforts, they are not alone. Other technology/delivery stocks are having the same hits and misses. For example, Uber Technologies—which has its hand in both food delivery and personal transportation—also has a moderate BUY rating. In addition, Uber (NYSE: UBER) has a relatively fair upside (77.20%), though it is not as impressive as DASH's 110.72% upside.

At the same time, while both stocks are in the red for the year, so far, Uber's YTD is twice that of DoorDash (-34.61% vs -63.63%). Fortunately, Uber's current Earnings-Per-Share is also nearly twice that of DoorDash, but in the other direction: DASH's EPS is only -$2.42 compared to UBER's EPS of -$4.54. They also have a similar Price-to-Sales Ratio (P/S), at 4.31 and 3.14, respectively, which are not bad, considering both stocks are showing negative returns. Indeed, both DASH and UBER are showing negative values in P/E ratio, net margin, Return-on-Equity (RoE), and Return-on-Assets (RoA), though UBER's values are 2 to 6 times bigger.

Lyft is also considered to be part of this sector and their values are not too different. Similarly bearish, theeir current price is near the stock's 52-week low, nearly down -75% on the year, so far. Still, their upside of +170.80% far surpasses the other two and its -4.18 P/E ratio, while still negative, is also the best of the three. While LYFT's margin, RoE, and RoA are also all negative, its values are far closer to DoorDash than Uber.

All that said, the moderate Buy rating for DASH is certainly one worth considering, especiallly when compared against a somewhat balanced field of peers.