DoorDash (DASH) Is Dashing Sharply Higher On Strong Q3 Report And Wolt Acquisition
2:38 pm Wednesday, November 10th, 2021
DoorDash (NYSE:DASH) is dashing higher today after the food delivery service reported strong Q3 results last night, easing fears that the company would struggle with a pullback as restaurants re-opened. In even bigger news, DASH also announced that it will acquire Wolt, a Finland-based food delivery service, in an all-stock transaction valued at approximately €7.0 bln.
In Q3, revenue jumped 45% yr/yr to $1.27 bln, well ahead of consensus. As DASH’s financials can be a little confusing, especially in terms of EPS, it’s almost better to focus on adjusted EBITDA, which the company provides guidance for. Q3 adjusted EBITDA was flat yr/yr at $86 mln, but at the higher end of the company’s $0-100 mln prior guidance. After the company guided down last quarter, its in-line adjusted EBITDA guidance for Q4, calling for adj. EBITDA of $0-100 mln, was welcome.
Going into this report, we were concerned about what impact the increase of on-site dining opportunities as COVID restrictions eased would have, especially during the summer months. However, the metrics don’t show a slowdown. Total Orders grew 47% yr/yr in Q3 to 347 mln. Marketplace GOV grew 44% yr/yr to $10.4 bln, nicely above prior guidance for $9.30-9.80 bln. DASH also guided to robust Q4 Marketplace GOV of $10.3-10.7 bln. These metrics alleviate our concerns about growth risks to the business.
DashPass member growth remains brisk. DASH exited Q3 with over 9 mln DashPass members, and DashPass orders reached an all-time high as a percentage of total Marketplace orders.
Investors clearly like the Wolt acquisition. It follows a trend of consolidation in the industry. Players in the space aim to combat cutthroat pricing by building scale; Grubhub merged with Europe’s Just Eat Takeaway.com, and Uber Eats acquired smaller rival Postmates. We suspect that we will continue to see further consolidation ahead.
Of Wolt’s 23 markets, 22 of them are new markets for DoorDash. DoorDash has been US-centric, but this deal provides an opportunity for it to grow its international business by multiples. Also, the deal enhances DASH’s goal of branching into non-food categories. Wolt has already established a strong presence in areas like cosmetics and electronics.
