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Shares of DoorDash (DASH) experienced a significant downturn, plummeting 17% in its worst trading session to date. This sharp decline reflects investor skepticism regarding the company’s aggressive spending strategy and its potential impact on near-term profitability.
The food delivery giant announced intentions to allocate “several hundred million dollars” in the coming year to fuel new product initiatives. These include advancements in autonomous delivery technologies and the development of a new, globally scalable technology stack. While these investments are intended to enhance the platform’s capabilities and expand its global reach, DoorDash acknowledged that they will incur “direct and opportunity costs” in the short term.
CEO Tony Xu addressed investor concerns during the earnings call, defending the company’s investment decisions. Xu emphasized that DoorDash remains focused on solving customer problems with innovative, high-quality solutions. He highlighted the company’s track record of successful investments in core operating areas, expressing confidence in its ability to replicate this success to drive future growth.
Over the past several months, DoorDash has strategically invested in expanding its market presence and diversifying its customer offerings. This expansion comes amid increasing competition from industry rivals such as Uber, and growing anxieties surrounding a potential contraction in consumer discretionary spending. The significant investments appear geared towards establishing a long-term competitive advantage, which Xu articulated as ensuring the “highest quality” service to customers.
Key strategic moves this year included the acquisition of restaurant booking platform SevenRooms for $1.2 billion and British food delivery firm Deliveroo in a $3.9 billion deal. The company also unveiled “Dot,” an autonomous delivery robot, and introduced DashMart fulfillment services designed to cater to retailers. These initiatives signal DoorDash’s broader ambitions beyond traditional restaurant delivery, encompassing grocery, retail, and autonomous logistics.
Wells Fargo analyst Ken Gawrelski noted that the scale and scope of these investments will be a crucial factor influencing the company’s stock performance moving forward. He acknowledged DoorDash’s operational management team and suggested that long-term investors will likely remain supportive throughout this investment phase. However, Gawrelski also cautioned that “patience may be required,” citing inconsistent disclosure practices as a potential concern.
DoorDash reported third-quarter earnings of 55 cents per share, falling short of the 69 cents per share expected by LSEG. However, revenue surged 27% year-over-year to $3.45 billion, exceeding Wall Street’s estimate of $3.36 billion. This revenue beat showcases the underlying strength of the DoorDash platform, even amidst growing competition.
Looking ahead, the company projects adjusted EBITDA for the fourth quarter to be between $710 million and $810 million, with a midpoint of $760 million. This falls slightly below the $806.8 million consensus estimate among analysts polled by FactSet, potentially contributing to investor anxieties about the company’s profitability trajectory. DoorDash anticipates that Deliveroo will contribute $45 million to adjusted EBITDA in the fourth quarter and approximately $200 million in 2026, indicating the strategic importance of this acquisition.
Despite the recent downturn, DoorDash shares remain up more than 20% year-to-date, underscoring the company’s overall performance in a volatile market. The long-term success of DoorDash’s aggressive investment strategy hinges on its ability to effectively integrate acquisitions, scale its autonomous delivery initiatives, and navigate the evolving landscape of consumer spending habits. The market will be closely watching key performance indicators, such as customer acquisition costs, average order value, and operational efficiency, to gauge the effectiveness of these investments.
DoorDash year-to-date stock chart.
