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

DoorDash announced its 2023 Q2 results earlier this month. All-time high monthly active users, all-time high order frequency, all-time high market shares in the U.S. and across many international markets — and, all these “all-time high” metrics are still growing. Across business lines, unit economics are also improving. The company’s bottom line, measured by Adjusted EBITDA, has almost tripled from a year ago.

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[I own DoorDash stocks.  This is not investment advice.  Please do your own due diligence.]

Earlier this month, DoorDash announced its 2023 Q1 financial results, which are generally robust.  I would like to share several pertinent points arising from those latest results.

Profitable Total Addressable Market (TAM)

Not all TAMs are created equal.   Some TAMs are profitable.   Some TAMs are unprofitable.  The profitability of TAMs varies considerably and typically cannot be easily discerned — because in most times, companies’ presentations tend to paint a rosy picture.

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[I own DoorDash stocks.  This is not investment advice.  Please do your own due diligence.]

DoorDash impressed investors by its continued strength in consumer engagement.  It continues to demonstrate strong growth, gaining market shares in most of the markets it operates, both within and outside of the U.S.  But DoorDash’s growing losses have raised concerns among investors. 

“Under-earning” As A Strategy

In contrast to other delivery services that have recently driven up consumer fees to improve platform profitability, DoorDash consistently drives down consumer fees.  I track the consumer fees on DoorDash, using publicly available data and my own algorithm.  The resulting chart shows a clear trend:  as time passes, consumers pay less and less for each order they place on DoorDash. 

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[I own DoorDash stocks.  This is not investment advice.  Please do your own due diligence.]

DoorDash announced its 2022 Q3 earnings last week and the disclosed results confirmed my prior predictions: DoorDash is doing well.  

“Food Is The Most Resilient Category”

Many investors see DoorDash as the ultimate “consumer discretionary” stock that would see its demand collapse in a recessionary and/or inflationary environment.  On Aug 9, 2022, I wrote a piece titled “DoorDash Is A Resilient Business.”  I was making the counterargument that DoorDash is the exact opposite.  

For casual observers, their instincts tell them that during bad times, people would want to save money, so demand for food delivery would drop.  This argument sounds logical, but the fact is that it goes against the facts!  

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[I own DoorDash and Uber stocks.  This is not investment advice.  Please do your own due diligence.]

I disagree with the market’s reaction to today’s gig worker classification rule proposed by the Labor Department.

Here is why.

First of all, this is not a surprise. Today’s proposed rule is actually the Biden administration’s second attempt to set gig worker rules — a highly politicized topic.  The first attempt started on Feb 5, 2021 (the first month of the Biden administration), when the DOL published a proposal to delay a gig worker rule made under the Trump administration.  The Trump-era standard was later withdrawn by the Biden administration, got into a legal fight, got reinstated, and got into another legal fight.  The second attempt was initiated in Jun 2022, when the DOL under the Biden administration announced that it was developing a proposed rule.  In Sep 2022, Reuters wrote multiple stories about this upcoming rule. 

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[I own DoorDash stock.  This is not investment advice.  Please do your own due diligence.]

In the second half of 2021, DoorDash’s stock price more than doubled.  In a short span of a few days in November 2021, DoorDash’ stock price surged by more than 30% to over $250 a share.  Clearly, DoorDash’s company fundamentals had not improved by 30% in those past few days.  Recognizing that stock prices reflected more of investors’ emotions and less of business fundamentals, I sold all my DoorDash stock in early November 2021. 

Coming into 2022, DoorDash’s share price has dropped by over 65%.  Over the past few days, it has come down by 20%.  DoorDash’s actual business did not come down by 20% over the past few days.  Realizing that stock prices reflect more of investors’ emotions and less of business fundamentals, I kept buying DoorDash stocks in recent days.

I am going to explain what I think has happened in the stock market and why I remain bullish about DoorDash. 

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

DoorDash announced its 2022 Q2 earnings last week.  My assessment is that DoorDash’s results are mostly positive.

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Update on Grubhub/Amazon Deal:  Starting Jul 6, 2022,  Amazon Prime members in the U.S. are given a free, one-year Grubhub+ membership with unlimited free food deliveries.  This arrangement effectively brought the e-commerce behemoth back into the U.S. food delivery arena.  To me, it served as a “stress test” on incumbent players such as DoorDash and Uber Eats.  And three days later, on Jul 9, 2022, I made the public prediction that the Grubhub/Amazon deal would NOT matter (see my blog here).  

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

I will write a piece later. Just to share the joy first.

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