Proprietary Data Insights
Financial Pros’ Top Food Delivery Stock Searches This Month
DASH Could Explode in 2023
While our sister newsletter, The Spill, rates stocks quantitatively, The Juice gives you a decidedly qualitative look.
We seek companies that have sound stories and comprehensive ecosystems with more than ample room for growth. Then, we look for long-term narratives we think will not only stay intact, but exceed expectations.
Last week, we updated our stance on one of those stocks: Uber (UBER).
Today, we turn to DoorDash (DASH). (You can review our bull cases on DASH and UBER here and here.)
Some seemingly bad news might not be that bad for DASH…
According to Grocery Doppio’s Q1 2023 State of Digital Grocery Performance, digital grocery sales – pickup or delivery orders – are down year over year.
Source: Grocery Doppio
They fell 0.9% between Q1 2022 and Q1 2023. But in-store grocery sales rose nearly 5.8% over the same period.
Blame inflation for the decline in digital.
The data shows that as consumers look harder for deals, they’re shopping in store not only to find them, but also to avoid any minimum-order requirements and additional fees. This shift in behavior explains another interesting datapoint: Pickup orders as a percentage of digital grocery transactions increased annually versus delivery, which tends to have higher fees.
Source: Grocery Doppio
On the surface, this seems like bad news for DASH.
But there are digital grocery orders that consumers complete directly with grocers. Then there are those they complete through DoorDash and other delivery apps. DoorDash calls this its third-party grocery business.
And DASH’s third-party grocery business has been booming:
DoorDash says profitability in its grocery business is improving as it continues adding market share in the space and works with merchants to modernize their fulfillment systems.
DoorDash provides access to just about every restaurant in your city. With its aggressive foray into groceries, including its own virtual grocery store called DashMart, DASH is looking to be a one-stop shop for consumers.
In other words, ecosystem expansion.
The Bottom Line: DASH is up 25% YTD. It’ll be interesting to see how it performs after it reports Q1 2023 earnings in early May.
Will it take a hit, in line with declining overall digital grocery store sales? Or is DASH immune to this effect of inflation, thanks to its comprehensive ecosystem, loyal restaurant-consumer base, and its 15 million DashPass subscribers?
The Juice thinks the latter. If there is relatively bad news, it may be a chance to buy on weakness. Because once inflation cools further, we think DASH’s overall and grocery sales will come roaring back, if they’ve even suffered over the last three months.
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