Why DoorDash (DASH) Stock Is Up Today

What Happened:

Shares of on-demand food delivery service DoorDash (NYSE:DASH) jumped 16.4% in the afternoon session after the company reported second-quarter earnings results. DoorDash increased its number of requests this quarter, as the business recorded stronger than-expected consumer demand. As a result, revenue outperformed Wall Street's estimates. The icing on the cake was adjusted EBITDA that crushed expectations and guidance for next quarter's adjusted EBITDA that did the same. Overall, this quarter was great, and shareholders should feel optimistic.

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What is the market telling us:

DoorDash's shares are very volatile and over the last year have had 13 moves greater than 5%. But moves this big are very rare even for DoorDash and that is indicating to us that this news had a significant impact on the market's perception of the business. 

The biggest move we wrote about over the last year was 3 months ago, when the stock dropped 15.6% on the news that the company reported first-quarter results. Next quarter's Marketplace GOV (gross order value) guidance was just in line and adjusted EBITDA guidance missed. Partly contributing to the pressure on profitability is the rising cost of business, as management noted that the new wage rules in Seattle and New York will increase costs to consumers and reduce sales. However, DoorDash assured that the rules would only reduce Total Orders by less than 1%. Also, as the company expands into new international markets, it has to juggle varying unit economics amidst volatile demand and currency fluctuations. These concerns were baked into the cautious forward guidance. 

On the other hand, DoorDash beat analysts' revenue and adjusted EBITDA expectations this quarter. It produced solid revenue growth. Overall, this quarter's results seemed fairly positive, but the outlook was less exciting, which for a growth stock at a premium valuation can spell trouble.

DoorDash is up 19.5% since the beginning of the year, but at $115.12 per share it is still trading 18.3% below its 52-week high of $140.95 from April 2024. Investors who bought $1,000 worth of DoorDash's shares at the IPO in December 2020 would now be looking at an investment worth $608.39.

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