On-demand food delivery service DoorDash (NYSE:DASH) beat Wall Street’s revenue expectations in Q3 CY2024, with sales up 25% year on year to $2.71 billion. Its GAAP profit of $0.38 per share was also 76.9% above analysts’ consensus estimates.
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DoorDash (DASH) Q3 CY2024 Highlights:
- Revenue: $2.71 billion vs analyst estimates of $2.66 billion (1.8% beat)
- EPS: $0.38 vs analyst estimates of $0.21 ($0.17 beat)
- EBITDA: $533 million vs analyst estimates of $515.8 million (3.3% beat)
- EBITDA guidance for Q4 CY2024 is $550 million at the midpoint, in line with analyst expectations
- Gross Margin (GAAP): 49.2%, up from 46.6% in the same quarter last year
- Operating Margin: 4%, up from -5% in the same quarter last year
- EBITDA Margin: 19.7%, up from 15.9% in the same quarter last year
- Free Cash Flow Margin: 65.8%, up from 17.1% in the previous quarter
- Orders: 643 million, up 100 million year on year
- Market Capitalization: $63.87 billion
Company Overview
Founded by Stanford students with the intent to build “the local, on-demand FedEx", DoorDash (NYSE:DASH) operates an on-demand food delivery platform.
Gig Economy
The iPhone changed the world, ushering in the era of the “always-on” internet and “on-demand” services - anything someone could want is just a few taps away. Likewise, the gig economy sprang up in a similar fashion, with a proliferation of tech-enabled freelance labor marketplaces, which work hand and hand with many on demand services. Individuals can now work on demand too. What began with tech-enabled platforms that aggregated riders and drivers has expanded over the past decade to include food delivery, groceries, and now even a plumber or graphic designer are all just a few taps away.
Sales Growth
Reviewing a company’s long-term performance can reveal insights into its business quality. Any business can have short-term success, but a top-tier one sustains growth for years. Thankfully, DoorDash’s 30.6% annualized revenue growth over the last three years was incredible. This is a great starting point for our analysis because it shows DoorDash’s offerings resonate with customers.
This quarter, DoorDash reported robust year-on-year revenue growth of 25%, and its $2.71 billion of revenue topped Wall Street estimates by 1.8%.
Looking ahead, sell-side analysts expect revenue to grow 17.8% over the next 12 months, a deceleration versus the last three years. Some tapering is natural given the magnitude of its revenue base, and we still think its growth trajectory is attractive.
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Orders
Request Growth
As a gig economy marketplace, DoorDash generates revenue growth by expanding the number of services on its platform (e.g. rides, deliveries, freelance jobs) and raising the commission fee from each service provided.
Over the last two years, DoorDash’s orders, a key performance metric for the company, increased by 23% annually to 643 million in the latest quarter. This growth rate is among the fastest of any consumer internet business and indicates its platform's popularity is exploding. 
In Q3, DoorDash added 100 million orders, leading to 18.4% year-on-year growth. The quarterly print was lower than its two-year result, suggesting its new initiatives aren’t accelerating request growth just yet.
Revenue Per Request
Average revenue per request (ARPR) is a critical metric to track for consumer internet businesses like DoorDash because it measures how much the company earns in transaction fees from each request. This number also informs us about DoorDash’s take rate, which represents its pricing leverage over the ecosystem, or "cut" from each transaction.
DoorDash’s ARPR growth has been decent over the last two years, averaging 5.5%. Its ability to increase monetization while effectively growing its orders demonstrates the value of its platform. 
This quarter, DoorDash’s ARPR clocked in at $4.21. It grew 5.6% year on year, slower than its request growth.
Key Takeaways from DoorDash’s Q3 Results
It was good to see DoorDash beat analysts’ revenue and EBITDA expectations this quarter. We were also glad it expanded its number of requests. Next quarter's EBITDA guidance was in line with expectations, which isn't the most exciting but shows the company is squarely on track. Overall, this quarter had some key positives. The stock remained flat at $154.50 immediately after reporting.
Is DoorDash an attractive investment opportunity at the current price?We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
