[I own DoorDash stocks and I may change my opinion anytime. This is not investment advice and please do your own due diligence.]

DoorDash released its 2024 Q4 results last week. Total Orders grew by 19% YoY and Marketplace GOV grew by 21% YoY. Its reported GOV topped almost all sell-side estimates while its reported Adjusted EBITDA landed within its own guided range.

Changing Perspective

In late 2022, I wrote that “DoorDash’s Stock Valuation Is Depressed” (link). From late 2022 to today, within a period of just a bit over two years, DoorDash’s stock price has gone up almost 5x, from $42 a share to now some $200 a share. Trees don’t grow to the sky. Few stocks, if any, can 5x every two years and do it again and again (if you know any stock that will do so, please let me know).

DoorDash’s stock price has gone up in a huge way. More and more investors have started to understand and appreciate DoorDash’s business, which directly results in investors bidding up DoorDash’s stock price. Today, if I am going to make the same assessment again, I will say, “DoorDash’s Stock Valuation Is Absolutely Not Cheap.”

What has not changed is DoorDash “the business”: it remains great. What has changed is DoorDash “the stock”: it is no longer cheap! In light of what is constant and what is changing, I believe strongly that I must update my own perspective.

I believe it would be outright imprudent to continue to view DoorDash’s stock as an unusually mispriced security. Instead, a more sensible perspective is to see DoorDash’s stock as a potential (but not guaranteed) candidate of a great long-term compounder.

DoorDash must continue to deliver solid operating results, quarter after quarter, year after year, to earn and keep the “compounder” status — or it may lose the status in a snap, followed by a massive drawdown. For investors, they must be mindful of the valuation they pay for a compounder — blindly buying into potential compounders is a recipe for financial disaster, as we have seen it too many times in the investor community.

Talking “Non-Restaurant”

Something interesting is happening in the non-restaurant delivery space.

In this earnings release, DoorDash updated some of its user and marketplace statistics. For 2024 Q4, DoorDash’s MAU count was “over 42M” (up from “over 37M” in Dec 2023), of which “over 25%” of the users ordered from “new verticals” categories (up from “over 20%” in Dec 2023). So, in terms of non-restaurant MAUs, DoorDash now has at least 10M (=42×25%) in Dec 2024, versus at least 7M (=37×20%) in Dec 2023.

As a comparison, Instacart disclosed that, in Jun 2023, its MAUs stood at 7.7M (systemwide, including Canada) and disclosed again in its 2024 Q2 earnings call that its MAUs number was in the “high single-digit millions.”

Therefore, it is quite likely — and only now known to the public — somewhere during the year of 2024, DoorDash successfully surpassed Instacart in terms of the number of monthly users who order non-restaurant items. Remember, Instacart is a grocery-delivery specialist. DoorDash’s main focus historically has been food delivery. And now, DoorDash almost certainly has more non-restaurant MAUs than Instacart has. What an achievement! What an irony!

No wonder in May 2024, Instacart and Uber announced a “strategic partnership” to embed UberEats within Instacart’s app. These two companies — Instacart in particular — must be clearly aware of what has been happening to them. The unstoppable instinctual “urge” they felt probably caused them to think: “we have to do something about it” — therefore, this “strategic partnership” was born.

Aggressive Reinvestment

The DoorDash management team’s strong intention to continue to invest in their own business should not be overlooked, as it will have major bearings on how the future years will shake out for DoorDash, both the business and the stock.

DoorDash’s management team has made it abundantly clear, again and again, that they intend to continue to invest in an aggressive manner. Below are some recent excerpts:

• 2024 Q3 press release: “We must consistently invest… so that we can invest even more in the future… we expect to continue investing to expand the potential of our services…”
• 2024 Q4 press release: “Entering 2025, we plan to continue to focus on creating incremental improvements in operational efficiency and reinvesting back into the business… We believe we have clear pathways for investment…”
• 2024 Q4 earnings call: “…we’ve been able to both grow our top line as well as significantly improve our bottom line as well as increase the amount of reinvestment in building this business.”

How aggressive has DoorDash’s investment been? According to my proprietary modeling, DoorDash’s pace of investment has been so aggressive that — despite all its major lines of business seeing improving profitability — the “contribution profit margin” for DoorDash’s non-U.S. Restaurant segments (e.g., new verticals, international), as a whole, has dipped into the red again! For attentive readers, this is exactly what I predicted might take place in my prior blog piece (link).

Going forward — and more specifically — I see at least two possible scenarios:

One, in order to elongate the growth runway for “U.S. Restaurants” (which is inevitably maturing, just like any other businesses in the world) — so it can grow faster and for longer, DoorDash management team may come to a conclusion to artificially repress or cut profitability in exchange for more growth. If this is to happen, investors would probably be stunned and come to think that their long-established view about DoorDash is no longer true, and DoorDash’s food delivery business is “suddenly” in decline — which certainly foreshadows an intense sell-off in DoorDash’s stock price.

If DoorDash’s management team is cognizant about this dynamic, what they should consider doing is to signal — to do it way ahead of time and to do it many many times, in public, to as many investors as possible — that the management team may consider in the future to cut the profitability of its “U.S. Restaurants” in exchange for more growth.

Two, which is not too different from the first point, is that by aggressively reinvesting, DoorDash may push its profitability ramp-up further into the future. If it is done “too hard and too fast,” sell-side estimates for DoorDash’s future earnings may need to be slashed, which will tank DoorDash’s stock price.

To be clear, I do believe a high level of investment activities, if done wisely with care, is a necessary part of a long-term growth story. What I am calling out above are just some varying forms of capital markets dynamics that could bring downdrafts to DoorDash’s stock price.

CEO Performance Award

I cannot resist but to bring up this point. Right before DoorDash’s IPO in 2020, CEO Tony Xu was granted the “2020 CEO Performance Award”: The award covers a seven-year period ending on Nov 23, 2027 and it has nine tranches which will individually vest according to the achievement of stock price goals, with the lowest goal set at $187.60 a share and the highest at $501.00 a share.

There are three elements that add extra significance to this “CEO Performance Award.” One, DoorDash’s founder Tony Xu currently owns approximately 11M shares of DoorDash stocks (including Class B shares and options), which account for less than 3% of DoorDash’s total shares outstanding. DoorDash is Tony’s brainchild and for all we can observe, Tony deeply cares about the business. So, common sense would lead us to conclude that Tony does want to own more of DoorDash. So, this performance award is something that he desires.

Two, the nine tranches together will deliver in total of over 10M shares to Tony. That is close to double the total number of shares that Tony owns — doubling his ownership in DoorDash, which he certainly wants.

Three, a careful reader will notice that deep in DoorDash’s original IPO Prospectus in 2020 lies such a language and I quote, “Any shares of our Class A common stock issued to Mr. Xu following the vesting and settlement of RSUs under the CEO Performance Award may be exchanged by Mr. Xu for shares of our Class B common stock on the terms set forth in the Equity Award Exchange Agreement between us and Mr. Xu.” Please remember also, and I quote the same prospectus, “Each share of Class B common stock is entitled to 20 votes per share.” Aha! This “CEO Performance Award” not only allows Tony to own more of DoorDash, but also for each additional share awarded to him, he will be able to control more of DoorDash at a 20x scale (by converting to Class B shares). Who doesn’t want such a deal?

Here is the last turn of this story. In early 2025, DoorDash’s stock price reached the first threshold of $187.60 a share. Despite DoorDash has only fulfilled $224M of its prior $1.1B share repurchase authorization (approximately 20% fulfilled), on Feb 11, 2025 at this current earnings release, DoorDash announced a new share repurchase authorization of “up to $5B” (inclusive of the remaining amount of the prior authorization). At the earnings call on the same day, an analyst asked the management team about “the pace of buyback going forward.” Tony said, “Ravi [the CFO], if you want to take the buyback question.” Ravi responded by saying the following, “I look on the buyback piece, right? I mean, we’re pretty happy with the results we’ve generated over the last couple of years. We’ve generated over $2 billion in terms of shareholder value. We’ve been opportunistic, our goal is to drive returns over a longer period of time and we’ll continue to be opportunistic and conservative going forward as well.”

“Opportunistic and conservative”? It certainly does not sound that the management team wants to buy back any shares anytime soon. Then, why announce $5B of buyback while the prior buyback authorization is still 80% unfulfilled and management also wants to be “opportunistic and conservative”?

A likely explanation is the following: In the minds of the management team, it is crucial to keep the stock price above $187.60 a share. Higher the better! You get it?

Uber showed us how it was done. Back in 2017 when Dara Khosrowshahi was hired to lead Uber, Dara was granted 1.75M shares worth of options in Uber’s stocks, which will kick in when Uber’s market cap reaches $120B. On Feb 6, 2024, that 1.75M option package kicked in and became effective.

What did Uber do in that same month? On Feb 14, 2024, Uber hosted an “Investor Update” meeting during which it announced its first ever share repurchase authorization of $7B. Stock price went up (of course). Then, quickly in the next few months, Dara sold over 2M shares of his Uber stocks (of course too!). Wink wink. And now, into 2025, it is very likely that Dara will continue to sell more of his Uber stocks.

To be clear, I am not accusing anyone for anything. Many things in business, I feel, are just “people things” and “common sense.” And of course, this $5B of share buyback authorization, hopefully, will add some stability to DoorDash’s stock price going forward — as probably earnestly wanted by the management team — which may not be a bad thing for external investors.

Key risks: Stock valuation risk; international business lackluster performance; fierce competition from software and payment companies due to the expansion of DoorDash’s “Commerce Platform.”

Disclaimer: Jackson Zhu (the “Author”), individually or through one or more entities controlled by him, holds long positions in the securities of and derivatives associated with DOORDASH, INC. (the “Company”) described herein and stands to benefit from an increase in the price of the common stock of the Company. Following the publication of this post, the Author intends to continue transacting in the Company’s securities, and may become long, short, or neutral on the Company’s securities. As such, the Author may change his view on the analysis presented as of any date following the date of initial publication. Likewise, the discussion contained here is not designed to be applicable to the specific circumstances of any particular reader, and you should consult with your own advisers to determine if any investment ideas discussed here are appropriate for your circumstances. The Author has obtained all information herein from sources believed to be accurate and reliable. However, such information is presented “as is,” without warranty of any kind, whether express or implied. The Author makes no representation, express or implied, as to the accuracy, timeliness, or completeness of any such information or with regard to the results to be obtained from its use. All expressions of opinion are subject to change without notice, and the Author will not undertake to update this publication or any information contained herein. Please read our full disclaimer at “jacksonzhu.com/about/.”