DoorDash Earnings: Network Effect Is Driving Market Share Gains

We were impressed with narrow-moat DoorDash’s strong network effect, demonstrated by the growth in orders and gross order value per order during the second quarter. The strong improvement indicates DoorDash has retained or slightly increased its delivery market share in the U.S., likely more at the cost of participants other than Uber. While unlike Uber, the firm remains unprofitable, we commend its continuing investments in enhancing the app and adding services to attract more consumers, from which the return such as top-line growth and free cash flow will be realized over the long run. Given the firm’s larger order sizes and higher order frequency, we raised our projections but kept our $155 fair value estimate. While the stock has nearly doubled year to date, it trades at only 0.55 times our fair value estimate and remains attractive.