Morgan Stanley’s Best Stocks For Economic Recovery: Top 9 Cyclical Stocks

5. DoorDash, Inc. (NASDAQ:DASH)

Number of Hedge Fund Holders In Q3 2024: 73

DoorDash, Inc. (NASDAQ:DASH) is a technology company that focuses on food delivery through a software application. As a result, the firm’s hypothesis depends on margins, customer retention, and high volumes to achieve economies of scale. DoorDash, Inc. (NASDAQ:DASH)’s dependence on volumes is critical because of its dominant market position. Data shows that the firm controls 67% of the food delivery market, which also introduces the need for robust consumer spending to help drive revenue. DoorDash, Inc. (NASDAQ:DASH)’s shares are up. 86% year to date driven by several factors such as the firm’s third-quarter earnings report revealing its first profit in history. During the quarter, the firm reported $0.38 in EPS which beat analyst estimates of $0.22. Looking ahead, the relatively nascent nature of the food delivery market coupled with the fact that DoorDash, Inc. (NASDAQ:DASH) is a leading player could help the firm drive growth and margins to create tailwinds for the stock price.

DoorDash, Inc. (NASDAQ:DASH)’s management commented on its margins during the Q3 2024 earnings call. Here is what they said:

“Let me give you two ways to think about this. If you think of the business as a collection of businesses, what you’re seeing is, I mean, we performed really well. The team has executed really well compared to the plan that we have set for ourselves at the beginning of the year. We’ve driven efficiencies in some parts of the business. We’ve reinvested that in other parts of the business, and the output is what you’re seeing on part of the face of the P&L. More specifically, if you think about the drivers, advertising has obviously been a driver in terms of gross margin improvement. The second thing I would call out, Andrew, is we’ve talked about the fact that regulatory costs will continue to reduce as we go through the year.

That’s been another driver. And the last one is efficiency from an overall logistics perspective. But the key thing that I would underscore is — remember, I mean, we are not operating the business towards a specific gross margin percentage. What we’re trying to do is maximize overall profit dollars over the long-term. And the way we do that is every dollar of efficiency we find, we’re going to reimburse that back in the business. And our goal is to flexibly invest that up and down the P&L, wherever we see the opportunity. Our goal has always been to build a large business while continuing to be manically focused on unit economics. That’s how we’ve operated, and that’s going to be the same philosophy in which we operate the business going forward as well.”