Market watchers think the food delivery industry may be facing a downtrend, but DoorDash’s new quarterly results might give them pause.
Analysts believe that food delivery platforms could be on for tough times after the pandemic ends – or at least its restrictions, like Verdict has already reported.
The argument for this is quite simple: when governments imposed lockdowns around the world to stop the spread of contagion, many people turned to companies like Deliveroo, Just Eat and Uber Eats for their food solutions.
Most restrictions are now lifted, meaning people are allowed to return to the streets and, importantly, to the restaurants they have been missing.
The end of coronavirus restrictions and the growing cost of living crisis have analysts expecting people to cut back on services like food delivery and entertainment streaming.
So it’s no surprise that analysts expect the food delivery industry to suffer.
Is DoorDash Beating the Downtrend?
At a glance, DoorDash’s new quarterly numbers appear to exceed expectations in a struggling market. Not only did its second-quarter results beat Wall Street expectations, it also caused its shares to jump 18% in after-hours trading.
That being said, it is still trading at $84.45, a significant drop from its November 2021 high of $245.97.
DoorDash beat the trend by reporting a 30% year-over-year increase in revenue. In the second quarter, it posted revenue of $1.62 billion compared to the $1.5 billion forecast by analysts, according to Refinitiv, CNBC reported.
The food delivery platform attributed the strong results to the fact that the number of orders soared by 23%, representing more than 426 million orders.
There were, however, slightly more losses per share than expected: 72 cents against an expected loss of 41 cents.
“While we have noticed several external indications of shifts in consumer discretionary spending, to date we have not seen shifts in consumer engagement in our U.S. market that are measurable or distinguishable from normal seasonal patterns. “said DoorDash.
DoorDash’s recent success is partly due to its acquisition of Finnish delivery services Wolt Enterprises last year. The Acquisition of $8.1 billion was completed in the second quarter of this year and brought DoorDash to new international markets. Wolt was reported to account for 12 million of DoorDash’s total orders.
What about the food delivery market?
DoorDash isn’t alone in seeing its shares plummet in the first half of 2022. Several food delivery companies are struggling in the stock market.
For example, the value of Just Eat’s shares fell from £4,076 in January to the £1,550 it currently trades at.
That being said, Just Eat said it was on track to meet its profitability targets despite its bottom line being hit by a heavy Grubhub writedown in the first half of 2022, as south east london reported.
Sixty-eight percent of customers use food delivery platforms, according to GlobalData Q2 2022 World Consumer Survey. Clients had used these services at least once a month.
The increased use of food delivery had made it the second busiest channel behind supermarkets.
So, is the food delivery industry suffering? Well, it’s a mixed bag and only time will tell how bad things will get.
GlobalData is the parent company of Verdict and its sister publications.