[This is not investment advice. Do your own due diligence.]

The delivery space has produced a lot of headlines lately. This time, it is about Gopuff.

Gopuff is an Instant Delivery company founded in 2013. It promises delivery in 30 minutes or less and its delivery fee is $1.95 per order.

On March 31, 2022, Bloomberg reported that Gopuff is close to raising $1B and is laying off 3% of its workforce (source link). Combined with information from other news sources, we know the following data points about Gopuff:

• The company is said to be valued at $15B, or $40B, depending on which news you read.
• Excluding this $1B round, Gopuff has $2B in cash and in its history, it has raised ~$5B in total. This means Gopuff has burned ~$3B of cash already.
• Gopuff has more than 15,000 employees worldwide.
• Gopuff’s 2021 revenue was just under $2B. Its order volume grew 70% YoY (2020–2021).
• Gopuff claims that it is seeing “more than $4 in profit per order.”

Like what I did in my prior post on Instacart (link), let me put these Gopuff numbers into perspective by making some comparisons with DoorDash.

First of all, it is important to recognize that Gopuff runs a vertically integrated model. It owns its micro fulfillment centers and it then delivers goods via contractors. So, accounting-wise, Gopuff’s revenue includes its cost of goods sold (COGS). For a vertically integrated Instant Delivery company, as seen from Fridge No More’s data (source link), revenue breakdown looks something like this: ~66% goes to COGS, ~18% goes to delivery drivers, and the remaining ~16% goes to sales and marketing, research and development, warehouse rents, payment processing fees, write-offs and all other business expenses. For Instant Delivery, the average order value is around $28. So, $28 x 16% = approximately $4. I guess that is what Gopuff means by saying “more than $4 in profit per order.” Well, with non-GAAP measurements, you can define your “profit” as almost anything.

For DoorDash, its revenue is net of restaurants payout, net of delivery drivers payout, net of refunds and credits, and net of promotions. (note: DoorDash does have a first-party DashMart business for which DoorDash owns the inventory, but that business is relatively small in size.) Therefore, DoorDash’s revenue is probably one of the “leanest” and “cleanest” in the delivery industry. Applying the same measurement standard onto Gopuff’s revenue, stripping out COGS and delivery costs, Gopuff’s “net” revenue for 2021 would be this: $2B or less x (100% – 66% – 18%) = ~$300M. Yes, Gopuff’s DoorDash-equivalent revenue is probably around $300M for 2021.

How about growth? For 2021 and on a year-on-year basis, DoorDash’s order volume grew by 70% — about the same as Gopuff’s growth.

As for cash burn, DoorDash had raised ~$2.5B as a private company and right before its IPO, DoorDash still had ~$1.25B in net cash (net of its then convertible notes). It means DoorDash burned through ~$1.2B worth of cash from its inception in 2013 until its IPO in 2020. Gopuff, however, has burned ~$3B worth of cash since its inception in 2013 (for a much smaller revenue, as I just showed).

How about organizational efficiency? Gopuff has over $15,000 employees. DoorDash has only 8,600 employees.

Lastly, let’s talk about valuation — where the absurdity lies.

DoorDash’s stock is now trading at ~$120 a share. With 2021 revenue of $4.9B, that translates into a 2021 P/S multiple of 8.6x.

If Gopuff’s $15B valuation is “correct,” measuring against a DoorDash-equivalent revenue of ~$300M (calculated above), that suggests a 2021 P/S multiple of 50x. Applying a 50x P/S multiple onto DoorDash, DoorDash share price would be trading at ~$700 a share today.

If Gopuff’s $40B valuation is “correct” … $40B is 2.67x of $15B. It means DoorDash’s share price should be trading at ~$1,900 a share today (=~$700 x 2.67)!

Versus Gopuff, DoorDash is a superior business (better market space, better profitability, better cash flows, better management teams). DoorDash’s share price today should be much higher than those implied numbers of $700 or $1,900 a share. Much higher than that!

Oh well. That is why I think Gopuff’s valuation is far too high. It also helps reinforce my bullish views on DoorDash.

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