Kristin Myers, Editor-in-Chief of The Balance, joined Closing Bell to discuss Doordash's delivery dominance, and what factors are driving down the stock so far this year.

Closing Bell

Doordash Stock Falls Despite Reporting Strong Delivery Numbers

Doordash delivering solid earnings after the bell yesterday revealing that sales are booming. The food delivery company reported a 35% revenue jump in its latest quarter and a big increase in total deliveries, showing that take out is not just the habit of the pandemic, but part of the future as well joining us now is Kristin Myers editor in chief of finance publication. The balance Kristen, welcome to the show. What were your big takeaways from Doordash is report? Yes, So it was a little bit of a mixed bag because we did have that miss at least when it came to the earnings. But as you're mentioning when I was looking at the earnings report, I was really taken in by against some of those sales and essentially their order deliveries and how many new subscribers that they had rivaling those numbers that they had in the first quarter of last year, as you were kind of highlighting a little bit, the biggest question not just for doordash but also for Uber eats and the food delivery space in general was how much they were going to be able to keep up with this pace of growth that they had seen throughout the pandemic now that we are seeing the restrictions lightening up that people are going back outside again, they're returning back to the office. They're not as home as often and as we're seeing from some of these numbers, however, people are still willing to order that take out food. However, I do think that there is a lot of risks looming for this space going forward. What does doordash is report, tell us about the state of the delivery market right now Kristen. Yeah I think right now what this is saying is that essentially take out and food delivery has become a habit now and I think that as long as people continue to still work from home, as long as we're still we still are in the middle of a pandemic of course we are far far more willing to go outside. A lot of people are vaccinated. A lot of people are traveling more and more often but as long as people are still staying somewhat at home, as long as inflation, this is a good point to note to note here, as long as inflation is really hammering some of those grocery bills more so actually than in the take out space. I think that what you're going to see is that hey food delivery is here to stay. People are happy to pay the money to take out some of that food. But again some of those risks do still loom going forward. We are still seeing that revenue growth starting to slow down, Surprising here, at least for me. And I'm hoping you can explain this because George Dish owns about 59% of the share of the US delivery market. Yes costs are rising losses are mounting. What is the disconnect here Kristen? Yeah, I mean I think we've got inflation totally on the rise. We have again we can't forget about it. I think so many people have almost forgotten about it. But then there's also the labor issue that came into play again. Right? A lot of these companies were fighting to keep these drivers known as contractors for example, instead of employees. So there was those political risks that have been looming. Uh And then there was also the offers and the promotions that these companies essentially had to offer to bring some of the drivers on board, bring some of the subscribers on board which by the way for doordash actually are being reduced which is good against their competitor right now. Uber eats. But again we still see people willing to pay those higher fees, those fuel surcharges even to again keep this this service and this convenience in their lives at least for a little bit longer. So why is the doordash stock down? Especially considering this was a solid report. Is it following wider market trends? What do you think here Kristen? Yeah, I think that unfortunately for doordash they've just gotten swept up in all of the market volatility that we are seeing. And I think as investors really consider how much the Fed is going to really be able to thread this needle. They start raising those questions again about recession fears. You start asking questions about discretionary spending. Unfortunately for doordash, this does fall completely into the category of discretionary spending. And so if we do see the US economy or the growth starting to slow, if we do see a recession come in 2023. Unfortunately for doordash, I do not see the stock faring as well uh in the longer term unless they somehow diversify. So some analysts calling for them to purchase lift or to do something else. Um but again that discretionary spend will definitely take a hit. So doordash has continued to grow since its I. p. o. in 2020 but stock is down 60%. What's happening? Yeah, we've seen a lot of these companies that are underperforming. I think that there's a lot of factors that have come into play first and foremost and this was something that we had talked about a lot when some of these companies even first went public which was essentially how almost overvalued they were a lot of these companies were not profitable but they went public at a time that there was I think a lot of fervor and excitement uh for a lot of these companies coming public. Doordash went public at the same time that we saw a lot of other companies that were not yet profitable that there was a lot of questions regarding their financials but they came public at a time when there was so much public excitement for some of these for some of these companies and we have seen a lot of them actually taking a leg lower over the last couple of years and you know the food delivery market no surprise here is expected to double in the next seven years. Do you think your doordash is positioned to do that as well? Do you think Uber eats is encroaching? I do think Uber eats is encouraging mainly because of the diversity play that exists there. Unfortunately for doordash they are I guess a one trick pony if you can almost call it that um they did do a little bit of innovation and expansion throughout the pandemic saying that they were going to deliver covid tests and I imagine that as they continue to look to grow and especially as those economic risks continue to, to really weigh on the company perhaps going forward that they might decide to get a little bit more innovative as well and also start to diversify a little bit again, like that call for them to purchase lift. Um, it almost seems facetious, but who knows, the company might decide, hey, we should actually try to go after Uber eats by, by being in the same sort of space directly as them and also take on mobility as well, which has definitely helped Uber at least in this last quarter with their mobility revenue actually exceeding that of their delivery revenue. But again, take out delivery I think is here to stay just by, how much are willing are people going to be willing to spend? I think does remain the question especially as we do see inflation rising. Do you think you mentioned diversifying when it came to Uber eats? Do you think doordash plans to to extend in things like alcohol, retail delivery, groceries losing moving forward? I do. And I because why wouldn't they? And and I think we've already seen the hints that they're starting to experiment in this space. So for for doordash to really leave all of these things on the table, especially when other companies have shown that it can be profitable and have shown that it is, it's definitely helpful for their business to be in that space. Who knows? We might all be ordering our groceries on doordash soon. All right, Kristin Myers, editor in chief of finance publication, The balance. Thank you so much.