CA - DoorDash: Uber And Instacart's New Deal And What It Means For DASH Stock

2024-05-09 11:48:59 ET

Summary

• There is intense competition and low profitability in the food delivery industry, and the recently announced Uber and Instacart partnership could further complicate things for DoorDash.
• DoorDash reported revenue growth of 23% year-over-year for the first quarter of fiscal year 2024, but still faces net losses.
• The article evaluates the competitive dynamics in the food delivery market, and points out the high valuation and low profit margins as significant risks for investors.

Some industries are just less attractive for investors than others. For example, it is well known that the airline industry ( JETS ) has delivered extremely poor results , with even household names like American Airlines ( AAL ) and Delta Air Lines ( DAL ) having gone through Chapter 11 bankruptcy protection. Some airlines have even gone through bankruptcy multiple times, as a result of intense competition and difficulty to really differentiate themselves. We mention this because we believe the food delivery industry to be relatively similar, with intense competition, little differentiation among providers, low switching costs and consumer loyalty, and tense relationships with their workforce and their suppliers....

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