|
Proprietary Data Insights Financial Pros’ Top Food Delivery Stock Searches in the Last Month
|
||||||||||||||||||||||||||||
5 Food Delivery Stocks Set to Soar 2024 |
|
Food delivery apps have taken the world by storm. But did you know that DoorDash (DASH) owns more than 50% of the market share in 41 states? Their speedy services operate in over 4,000 U.S., Canadian, and Australian cities, with Uber Eats far behind with just 500 cities. In one of our recent issues, we looked at Uber along with other food delivery apps. Since then, there have been two important developments. First, the search volume by financial pros – the folks who manage money – surged almost fivefold. Sponsored – Second, our partner MobySponsor came out with DoorDash as one of their key stocks to watch in the coming months. Given their recent picks include a 1,080% gain on Alcoa and 831% on Microstrategy, our ears perk up when they talk. Join over 5 million people making better investments by top-tier hedge fund analysts now. Learn more about Moby’s 30-day guarantee by clicking here. So, why is DoorDash suddenly getting all the love? We think we know the answer… DoorDash’s Business Founded by four Stanford students in 2013, DoorDash has a pretty simple business model. Drivers – known as dashers – deliver food from restaurants to customers. DoorDash pays them per delivery, along with tips from the customer. On the other end, DoorDash charges restaurants a fee for being their delivery service, while providing the necessary equipment to manage their orders and services. Customers pay a delivery fee or sign up for a Dash Pass to receive unlimited deliveries at no fee for a nominal monthly charge of around $10. DoorDash has expanded its traditional model to now include flexible financial arrangements with restaurants that include marketing and other enhanced services. Additionally, the company is looking to expand into branded credit cards. This is all well and good, but the real meat is in the financials. Financials
Source: Stock Analysis At first glance, nothing seems special. Sure, they have high growth. But so do most other apps. However, if you look towards the bottom, you’ll notice the massive expansion in free cash flow. This comes as DoorDash shrank its P&L losses shrank to $157 million in Q4 of 2023. Adjusted EBITDA basis as a percentage of marketplace sales volume more than doubled YoY as SG&A became smaller percentages of total revenue.
Source: DoorDash Q4 Earnings Release This tells us DoorDash hit that inflection point where its fixed costs are being spread out, allowing it to turn profitable. And with a +20% growth, the $1.6 billion in cash from operations could quickly balloon. In fact, with over $4 billion in cash on the balance sheet, management decided to return $750 million last year through stock buybacks, a yield of roughly 1.5%. Valuation
Source: Seeking Alpha DoorDash’s earnings have yet to catch up with its cash flow. Its trailing P/E non-Gaap ratio of 69.2x looks terrible. Yet, its price to operating cash flow is just 29.9x, only slightly higher than Domino’s Pizza’s (DPZ) 26.3x, despite its being a more established business. Current estimates peg DoorDash’s forward price to operating cash flow at 26.8x, which we believe is too conservative. Lastly, we want to highlight DoorDash’s non-GAAP price-to-earnings growth ratio (PEG) of 0.6x, indicating shares are cheap when you account for growth. Growth
Source: Seeking Alpha What’s interesting is how DoorDash is valued somewhat similarly to Domino’s. Yet, DoorDash puts up +20% growth regularly. Like Papa John’s (PZZA), Domino’s is lucky to see mid-single-digit growth. And again, the free cash flow growth at the bottom is just phenomenal. Profitability
Source: Seeking Alpha Currently, DoorDash’s margins aren’t that attractive, save for its gross profit margin. However, this isn’t unusual given its recent growth. We expect that to improve in the coming years, especially if the free cash flow margin improves beyond 16.6%. Our Opinion 10/10 It’s pretty easy to see why financial pros and Moby are interested in this stock. DoorDash is a sleeper that no one seems to notice. Despite its size, it expects +20% growth YoY, with margins improving as it gets larger. With more cash coming in, share buybacks should increase, and we could see some strategic acquisitions. Sponsored – We have to hand it to the experts over at Moby. Had it not been for their impressive analysis, we might have overlooked this hidden gem. With an impressive track record that includes a +233% gain on Nvidia in 2023, it’s clear why so many investors turn to Moby for expert advice and insights. Click Here to take advantage of Moby’s 30-Day Guarantee and see what Moby can do for you. |
|
News & Insights |
Just Spilled |
|
Want to get content like this directly to your inbox? Then we urge you to sign up for our newsletter here |