Me So Hungry!

  • Intro
  • Universe
  • Major Players
  • DoorDash
  • Bulls
  • Bears
  • Key Metrics
  • Conclusion/Recommendation


I may date myself here, but 10 years ago when I started college, the thought of being able to order food from an app on my phone and have it delivered to my house was a pipe dream.

Heck – the best thing we had was the ability to call in an order over the phone and pick it up by walking to the restaurant.

I know, I know. It sounds like I went to college in the 1950’s or something.

But remember – food delivery, especially via phone app, is still a new concept.

Yes, we have always had the humble pizza delivery person willing to drive their 20 year old piece of junk straight into our rose bushes to deliver that pizza in under 30 minutes.

But what about hamburgers? Sushi? Alcohol?

The ability to order almost any food you can think of, directly on your phone, without calling the restaurant is a new concept that has taken the world by storm, thanks to COVID and the fact that we were all locked down in our homes for nearly 2 years.

Ordering food from the comfort of your own couch (or bed) is now just as easy as buying that car online from Carvana. 

Even as things have begun to return to normal, workers are returning to the office, kids are going back to school, there is still that desire in all of us to just pay the small fee and have food delivered right to our homes, instead of going out one more time…

But is this sector prime with good investment opportunities? Will food delivery continue to grow, or will returning to a sense of normalcy bring everyone back to restaurants and casual dining establishments?

Let’s dive in!


Food delivery is currently a $323 billion market, globally, and is expected to grow to $466 billion by 2027. While that 7.6% annual CAGR is an impressive number over 5 years, what is more eye-catching is the recent growth in this market:

From 2017 to 2022, the food delivery market has more than tripled in size from $105bn to $323bn.

What is clear is what we pointed out above: COVID jump-started this market adoption: a 47% increase in growth between 2019 and 2020 was the catalyst this industry needed.

As technology continues to expand into literally every area of our lives, there is no turning back for this development in food delivery services.

If you can think of a world without restaurants, then we can probably find a reason to see food delivery dying out. But the always-busy worker will opt for ordering in 9 out of 7 nights a week.

<I should know – I had two dinners last night and one of them was a late-night McDonald’s order through DoorDash>

The “problem” with this industry in general is that it is expensive and requires scale to become profitable.

Think about it logically: a company that delivers a product someone else produces. They don’t have inventory costs or production costs. But they do have labor & supply chain-related costs. The revenue garnered from this business cannot be larger than the revenue derived from the product.

Example: you would not order a $15 hamburger & fries for $30 just to have it delivered, right?

The delivery service tacks on an additional fee to the orders they are bringing customers, but at a certain point, customers will have more incentive to drive (or walk) themselves to the nearest restaurant.

This will be a different price point depending on the market you live in, but for most of us there is a logical scenario where we are unwilling to pay 2x (or 3x) just for the sake of having food delivered to us in 20-45 minutes.

This just means that there is a limit to how much revenue can be derived from this business, and while costs will be high at the onset, revenue will take time to ramp up to a comparable level.

This means that profitability will be a challenge until a few leaders step out in front and can dominate the market.

McKinsey wrote a fantastic piece about the evolution of food delivery. If you are interested in digging in another level here, I would highly recommend reading this.

Major Players

Most of this industry is still in the developing & private space. There are many ideas that have seen great success, but only a handful of companies are traded publicly.

The top players by share of revenue are listed below:

Today, Uber, DoorDash & Waitr are publicly traded companies on this list.

Given the proportion of sales attributed to DoorDash, we are going to dive a little deeper into their business.


I won’t spend excess time describing the business of DoorDash ($DASH), as I think everyone has a solid understanding given our overview of the market above.

Also, I would bet that >90% of y’all have used DoorDash at one point in their lives.

Let’s break down DASH’s revenue, as I have found that to be a great starting place when evaluating companies.

DASH has 3 areas of revenue generation: 1) Marketplace, 2) Drive and 3) Storefront.

1) Marketplace is the application that you and I know, and use, which boasts an average of 25 million monthly active users and generates most of the DASH’s revenue.

This is the platform where consumers can search for specific food, restaurants, and items to fulfill their needs. DoorDash then sends the order to the restaurant and a driver to pick up the order and deliver it directly to the consumers.

Within the Marketplace segment, DoorDash also has a membership service offering, called DashPass (typically $9.99/month), that entitles members to certain discounts and reduced fees when using the platform.

2) Drive is a white-label logistics service that allows local restaurants to add “delivery” options to their carry-out menu, utilizing DoorDash’s fleet of drivers and paying a fee for delivery services, without utilizing the marketplace app.

The main difference here is that consumers would be placing orders directly at their local restaurant, who are outsourcing delivery services to DoorDash.

The final source of revenue for DoorDash comes from their 3) Storefront service, which is a turnkey solution that allows restaurants the ability to build out their own delivery services. Think of this as more of an e-commerce service offering rather than a logistics service.

DoorDash provides merchants with the ability to create their own channel for e-commerce business and delivery services.

As of Q2 2022 earnings, DoorDash brought in $1.6 billion for the quarter. This leads us to an estimated $6.4 billion in annual revenue, which is a 31% increase over 2021 revenue of $4.8 billion.

DoorDash does not break out the levels of revenue from each segment, highlighting only that most revenue is earned within their Marketplace platform.

DoorDash measures their revenue as a percentage of Gross Order Volume (GOV) within their marketplace. GOV for the most recent quarter was $13.1 billion (an increase of 25% YoY) and DoorDash’s take rate came in at 12.3%, or $1.6 billion.

While it is an extremely bullish sign to see revenue continuing to increase each quarter, and management continuing to provide strong future forecasts, the problem lies with expenses.

While revenue has increased 10% between Q1 and Q2, operating expenses increased 15% and have been outpacing revenue growth quarter after quarter going back to the IPO in 2020.

Right now, operating the business takes up the biggest portion of expenses, accounting for nearly 47% of total Expenses.

As inflation continues to be high and concerns over the price of gasoline only increase, we may see these expenses continue to outpace revenue growth.


  • DoorDash holds the top position, in terms of market share, with over 1 million “Dashers”, 20 million customers and relationships with over 450,000 merchants. They will be hard-pressed to be overthrown at their current rate of growth and market impact.
  • Consumer behavior is shifting further and further away from in-restaurant dining, which puts DoorDash in prime position to reach profitability in the short term.
  • Although higher costs are a headwind to DoorDash, these will also provide a barrier against new entrants and will help DoorDash stand above the rest if they can take advantage of economies of scale over time.


  • Inflationary concerns and the cost of fuel will only add to DoorDash’s already rising costs of operation. This will certainly continue to hinder their ability to achieve profitability.
  • There are no switching costs for consumers ordering food through DoorDash or UberEats or GrubHub. That stickiness factor may end up cutting into DoorDash’s market share going forward.
  • Amazon is making moves, recently acquiring a stake in GrubHub, and when Amazon moves into a market segment, it often signals the end for entrenched businesses. Along with this move, Amazon is giving away a free 1 year membership to GrubHub Plus for all Amazon Prime members.

Key Metrics

  • Current Share Price (as of 9.6.22): $58.27
  • Enterprise Value: $18.4 billion
  • Total Cash: $2.5 billion

NTM Metrics:

  • EV/Sales: 2.6x
  • EV/EBITDA: 50.4x
  • P/E: 413x
  • P/FCF: 108x


Wall Street Analysts have pegged DoorDash as an Overweight position, with an average price target of $110.25. 30 analysts cover DASH, equally split between a BUY rating and a HOLD rating.

While Wall Street love for these unicorns is fairly common, what is surprising is that Morningstar has a price target for DoorDash at $159. This implies a 174% return based on the current price today.

Morningstar is not known for throwing out aggressively high price targets on companies, especially ones that have yet to attain profitability, so this could be a much more positive signal on the future of DASH.

Our opinion is that there seems to be a lot of upside for DoorDash, given their current foothold in the market and large customer base. The stock has been absolutely hammered this year though, falling 60% already.

The key catalyst for the remainder of this year will be if DoorDash can hold on to its market share with Amazon and GrubHub moving in with such a strong move. There are over 150 million Prime members and all of them just received 1 year of free deliveries through GrubHub.

If DoorDash can survive that type of move by Amazon, and even gain market share - that says a lot about their stickiness in the eyes of consumers. Survival, at this point in time, is more pressing than reaching profitability.

With fears of a recession and rising costs of everything, we think it would be a stretch to claim that DoorDash can reach $110/share, let alone $159, within the next 12 months. But given the fact that DASH is down 60% and consumer discretionary is only down 24% YTD, there may be room for DASH to stage a comeback in the range of 20-40% over the next year. 

Especially if they keep helping me out with my late night McDonald’s cravings…

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