Both restaurants and consumers are increasingly relying on food delivery apps and websites as Covid-19 continues to limit options for dining out.
DoorDash in particular has seen success during the pandemic. The company had its initial public offering (IPO) on December 9, 2020, raising $3.4 billion in one of the biggest capital raises from a public offering of the year, and valuing the company at $72 billion.
Online food delivery reportedly services generated $26.5 million in revenue in 2020, a more than 20% increase from 2019. DoorDash leads the industry with a market share of 37%, followed by GrubHub at 31%, Uber Eats at 21%, and Postmates at 10%.
Unlike some food delivery services such as Uber Eats or GrubHub, Doordash provides restaurants with the software to fulfill orders from customers, as well as access to local customer marketplaces. Doordash also accesses many smaller locations—such as the suburbs and smaller cities—that other services have overlooked, according to venture capital firm Goodwater Capital*.
The decline in restaurant dining has potentially helped DoorDash, according to Goodwater. Since the beginning of the pandemic, DoorDash’s Gross Order Value (GOV) has increased two to three times. And in a survey conducted by the venture capital company, 52% of respondents said that they had ordered food delivery since the pandemic began.
And even as dining out returns, consumers are likely to continue ordering delivery with services like DoorDash. Seventy-four percent of people Goodwater surveyed said that they would not stop ordering delivery if dining out returned to pre-pandemic levels. However, DoorDash faces stiff competition from competitors like Uber Eats, GrubHub, Resy, and more. Remember that all investing involves risk and that past performance doesn’t guarantee future growth.
You can find more information on the DoorDash IPO here.
More About IPOs
Following an IPO, a new stock can be subject to significant increases or decreases in market price. That’s known as volatility. Stock volatility can be particularly high in the first few months following an IPO and as a result, so can the potential for short-term losses. If you’re in this stock for the long haul though, it could be an opportunity for dollar cost averaging.
Oftentimes, fluctuations in price are due to the expiration of something called a lockup period—this is when company insiders, such as employees, sign an agreement that prohibits them from selling shares for a specified period of time.
When lockup periods expire, insiders tend to sell their stock in order to realize profit, sometimes causing the stock price to fall, or experience large changes in price in the process.
You can find out more about the lockup period and other information about DoorDash by looking at its prospectus, a publicly available document on the Securities and Exchange Commission’s website EDGAR.
Remember the Stash Way—invest for the long-term, invest regularly, and don’t put all of your eggs in one basket.