![]() ![]() ![]() With rising wages, DASH will presumably have to pay their drivers more. When so many businesses are trying to hire, wages rise which can be seen in the noticeable upward inflection post-pandemic in the chart below.Ĭrude oil, and therefore gasoline is spiking.Īnd finally, food prices have inflected upward as one of the main drivers of inflation.Īll 3 of these expenses either directly or indirectly fall on DASH. Since the pandemic there has been a tremendous labor shortage with job openings climbing to a historic high. Food delivery by its very nature consists of 3 inputs:Īs you know, inflation is high and these are some of the epicenters of inflation. Operating expenses risingīeyond all the corporate-level expense, the basic act of delivering food is rapidly becoming more expensive. It is a bit of a meat grinder in which rising marketing and promotion costs merely serve to shift around market share rather than expanding the pie. ![]() With minimal ways of driving customer loyalty and virtually no switching costs, there is a continuous bidding war between the delivery apps. In a week where Grubhub ( GRUB) is offering no delivery fees, customers will migrate there and when Deliveroo enters the market it will come with some special promotion causing customers to temporarily move there. Customers are going to use whichever delivery app gives them the best deal. There are over a dozen delivery apps each trying to cut into DASH’s market share. This, in my opinion, is ultimately what will make this industry perpetually struggle to be profitable. Sales and marketing expense of $1.2B in the 9 months ended 9/30/21 was the second major line item cutting into profitability. I don’t know how a company can overcome overhead costs that extreme. The idea that the CEO of a non-profitable fledgling company like DASH made $413 million is just absurd. To put that in context, he manages Prologis ( PLD) which is a gigantic and overwhelmingly profitable international logistics warehouse landlord. The highest paid REIT executive in 2019 was Hamid Moghadam at just over $30 million. With 2021 10-K not yet released I don’t yet know the 2021 figure, but the income statement above shows G&A expenses even higher in 2021 than in 2020.Īs a real estate focused investor, this compensation is just mind-boggling. In 2020, Tony Xu, the Founder and CEO of DASH, made over $413 million, mostly in the form of restricted stock units. Extreme CEO compensation (and other executives as well). ![]() The nine months ended 9/30/21 featured a loss from operations of $298 million and a net loss of $313 million or $0.94 per share.ĭespite the favorable environment, the company lost money for 2 reasons: To top it all off, DoorDash got to look like the hero by presumably helping keep the local restaurants open (a notion I will challenge later in this article).Ģ020-2021 was such an extraordinary opportunity for DoorDash with a greater than 50% share in a freshly doubled revenue stream…. In such an environment, the delivery apps have been able to insert themselves as a middle man clawing money from both customers and restaurants in exchange for connecting them. They have the ultimate captive audience with COVID restrictions and COVID fear (perhaps rational) preventing restaurants and customers from directly interacting with one another. Take a look at the sales spike for the industry in mid-2020. In addition to having a massive market share at 57%, the market into which they sell has doubled in size as a result of the pandemic. I don’t think there has ever been a more perfect environment for DoorDash. Overall, I see fair value as just a fraction of current price. a shift in public opinion on delivery apps.Overvalued stocks can stay overvalued for a long time, but there are 2 catalysts in place here to bring it back down to earth: These challenges will make it difficult for earnings to turn positive and yet DASH is trading at a $45B valuation. Hapabapa/iStock Editorial via Getty Images The Short ThesisĭoorDash ( NYSE: DASH) is a strong short sale candidate as there are numerous problems in its business model that seem to have been overlooked. ![]()
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