DoorDash is ‘executing exceptionally well,’ analyst says
JMP Securities Analyst Andrew Boone joins Yahoo Finance Live to discuss fourth quarter earnings for DoorDash and the 2022 outlook for the food delivery service.
Video Transcript
BRIAN SOZZI: DoorDash shares are surging, follow the company's better than expected overall earnings report, which included record orders. Stock is the top trending ticker on the Yahoo Finance platform this morning. So what's the trade here? JMP Securities analyst Andrew Boon joins us for more. Andrew, buy or sell after a strong report like this from DoorDash?
ANDREW BOONE: We're buyers here. Going back to last night, we thought the key takeaway was just that order frequency continues to be strong for diners. So if you think back-- you go back kind of six months, 3Q, a bunch of companies highlighted kind of the reopening and issues there. You saw more companies highlight that in 4Q. And yet, you're seeing diner frequency and just overall diner engagement remain very strong on DoorDash's platform as they're executing exceptionally well.
JULIE HYMAN: And Andrew, talk to us about how and why, right? What is DoorDash doing right here? Because we know the environment is pretty competitive.
ANDREW BOONE: Yeah, it's very much true. One of the things that they're doing right is moving people to DashPass, right? So DashPass is DoorDash's subscription platform. Historically, the company has talked about order frequency being kind of double that of non-members for DashPass. And so as these guys have moved now 10 million people on to DashPass, that's helping to sustain order frequency.
You know, if you look at OpenTable data, people are returning to restaurants, and yet, DoorDash is continuing to drive selection for consumers. They talked about adding 150,000 restaurants to the platform in 2021. They're adding value, right? DashPass makes it cheaper for every order and yet increases frequency. So overall, it's a positive for the company.
And they're, very simply, just executing exceptionally well, right? Like, they're doing a better job with customer service. They're doing a better job with making sure that orders are getting to consumers fresh and hot. There was news out last week that they redid their McDonald's contract to ensure that there's a penalty, actually, if Dashers have to wait longer for food. So all of that means that diners are just happier with the product overall.
JULIE HYMAN: And I'm also curious not just about the diner side of it and that customer service side of it, but also the relationship with the restaurants. You mentioned McDonald's, but in the past, there have been some criticisms of DoorDash and some of its competitors, for that matter, in terms of the fees that they charge for the restaurants with which they have relationships, et cetera. Where does that situation kind of stand here, as they are doing that expansion that you talked about?
ANDREW BOONE: Yeah, I mean, look, overall, they did $40 billion of gross food sales on the platform in 2021, right? So they're a key partner for restaurants in terms of the marketing channel. If you go back earlier in the year, I think it was April, DoorDash introduced a new pricing tier for restaurants. So there's now more variety if you're a restaurant. You may not want the full suite of services, but if you do, it's now available and you can pay up for that.
DoorDash is essentially just becoming a better partner for restaurants in terms of the marketing channel, as well as just offering different tiers of fees. And so if you're a restaurant, you can kind of pick whatever is the right service for you. And I think that makes them more friendly. If you think about the regulatory environment where there were fee caps in 2020, 2021, a lot of that is now rolling off, right? And so I think you're basically seeing a more favorable kind of perception of DoorDash from restaurant partners, as well as local city officials and certainly consumers.
BRIAN SOZZI: You know, their main competitors, is it fair to say that they are outperforming UberEats?
ANDREW BOONE: Really interesting point. So Uber kind of highlighted that they thought that they had share gains in terms of 4Q. If you look at the actual numbers-- I'm looking at quarter over quarter sequential growth for kind of 4Q-- it looks like DoorDash took share. And so, you know, the company talked about two points in 2021 of market share gains overall.
I think the bigger picture is that any of the smaller kind of food delivery players, those that were private, those that were more regional, are certainly losing share to the bigger two. And so this is increasingly, in how we view it, a two-horse race between DoorDash, as well as UberEats. They're taking share across New York, which used to be more of a seamless market, right? They're taking share across different metros. It's UberEats and DoorDash at this point.
BRIAN SOZZI: Indeed, it is. Just a really big quarter out of DoorDash, market responding accordingly. JMP Securities analyst Andrew Boone, thanks so much for joining us. Appreciate it.
