3. DoorDash, Inc. (NASDAQ:DASH)
Latest Fiscal Year Annual Growth Rate: 31.17%
Bridgewater Associates’ Q1 2024 Investment: $81 million
DoorDash, Inc. (NASDAQ:DASH) is primarily a food delivery services provider that connects restaurants with their customers through delivery drivers. While it has been trying to diversify into other markets, its primary business model is still food delivery where DoorDash, Inc. (NASDAQ:DASH) is a market leader. One initiative that the firm is heavily investing in is grocery delivery, as DoorDash, Inc. (NASDAQ:DASH) believes that it can use its vast driver network to expand into the grocery space and take on eCommerce firms. These initiatives make DoorDash, Inc. (NASDAQ:DASH) a classic growth firm which has also left investors yearning for profitability. Analysts expect the firm to turn profitable in Q3, so 2024 can end up with some fireworks for the delivery company. The growth initiatives also stole the story during DoorDash, Inc. (NASDAQ:DASH)’s Q1 2024 earnings report. The set of financials saw the midpoint of its operating income (EBITDA) guidance for Q2 of $375 million missing analyst estimates of $394.4 million. Like other industry players, DoorDash, Inc. (NASDAQ:DASH) might also face additional cost pressure in the future if new regulations force it to treat its drivers as employees. This can raise costs and further stress an income statement that is already strained by growth spending.
DoorDash, Inc. (NASDAQ:DASH)’s initiatives and profitability were also at the center of Artisan Partners’ coverage of the firm in its Q1 2024 investor letter. Here is what the fund said:
During the quarter, we initiated new GardenSM positions in DoorDash, GoDaddy and Vertiv. DoorDash is a technology-driven marketplace that enables couriers (Dashers) to deliver restaurant and other local orders on-demand to consumers. The company is a market leader in restaurant delivery, a business that continues to gain US market share (with healthy margins) and grow internationally. At the same time, heavy investment in newer businesses has limited company profitability. Most notably, grocery delivery is a largely untapped market due to inventory management challenges (in-person grocery shopping involves a high degree of product substitution). This business unit has been losing money. However, the company believes it has a competitive cost advantage given its existing Dasher network, and continued growth will lead to profitability—something it is not getting credit for by the market. The future near-term profit trajectory from new businesses is unclear, but we view management as very rational with its spending. Either these initiatives will yield additional profitable revenue streams, or they will be deprioritized in the coming years—in both scenarios, we expect solid profit growth over time.
