will report its quarterly earnings on Thursday after an unusually strong day for the stock.
Shares of the food delivery company (ticker: DASH) jumped 11% to close at $68.17 on Wednesday, potentially due to optimism about the fourth-quarter report, due after the market closes Thursday. Government data on retail sales confirm spending at restaurants is surging.
The stock has gained about 15% this week, though it is miles away from its initial public offering price of $102, or its first close of $189.
How long this week’s rally lasts depends in part on
‘s forecast for gross order value, defined as the total value of its app orders, including tips, taxes, and fees. The outlook for annual profits is critical as well, as are DoorDash’s plans to manage rising costs, especially following the company’s $3.5 billion purchase of the European food delivery company Wolt last year.
In November, CEO Tony Xu said the company is laying off about 1,250 employees, acknowledging inadequate management of “team growth.”
For the third quarter, DoorDash reported total costs and expenses of more than $2 billion, up 46% from a year earlier, while revenue was at $1.7 billion. The surge in expenses was partly due to the absorption of costs associated with Wolt, as well as stock-based compensation.
The company has a history of generating losses per share but has maintained a strategy of making “significant” investments for growth over the years.
This time around, additional costs are a possibility. In November, New York City regulators proposed a rule that would require apps to pay delivery workers a minimum of $23.82 an hour, not counting tips. for time spent on trips and on call. The rate, to be phased in from 2023 to 2025, would be adjusted annually for inflation.
The proposal has yet to pass, but BofA analyst Michael McGovern estimated the city contributes 90 million orders a year for the company. If the cost of each one was $2 higher, that would add nearly $200 million in expenses, according to the analyst.
(UBER), in its latest earnings report, didn’t appear concerned about the potential increase in costs, saying “it will get absorbed into the marketplace.” McGovern, in the note on Tuesday, wrote “the rule could be more impactful for DASH than
Still, some on Wall Street have been bullish. MoffettNathanson analyst Michael Morton picked up coverage of DoorDash last month with an Outperform rating, setting a target of $79 for the price. He said he expects volatility in the stock but likes DoorDash’s moves to “consolidate the market” in the U.S. and Europe.
McGovern reiterated his Buy rating on the stock Tuesday, but lowered his target for the stock price to $72 from $80. He cited market-share gains as well as a potential increase in restaurant spending, which he said could disproportionately help DoorDash, “the share leader.”
Wednesday’s retail sales report showed strength in sales at food services and bars in January. Sales rose 7.2% from December and 25.2% from January 2022.
Write to Karishma Vanjani at firstname.lastname@example.org