DoorDash’s Q4 Results Display Strong Network Effect

We were pleased with DoorDash’s DASH fourth-quarter results as the firm’s network effect moat source remained on display, with growth in users and monetization. Order frequency was stable when compared with 2021 even after the addition of Wolt. While DoorDash’s offerings are not as diversified as Uber’s, the quarterly results demonstrated the firm’s ability to attract subscribers and cross-sell other delivery services, which further strengthened the platform’s network effect and could lower consumer acquisition costs and expand margins. DoorDash expects strong growth in the first quarter and full-year 2023, which not only includes contribution from the purchase of Wolt but also solid organic growth. The firm also announced a $750 million share-repurchase program. We are maintaining our $155 fair value estimate, which represents attractive upside.

Gross order volume increased 29% from the prior year to $14.4 billion, driven by growth in orders (27%) and order size (2%). Without Wolt, which increased its gross order volume by 50%, DoorDash’s gross order volume grew 20%. Gross order volume for nonrestaurant services DashMart and grocery were up 60% and 100% year over year, respectively, as the firm continues to progress in diversifying its offerings, increasing attraction on both the demand side (consumers) and supply side (couriers).

The firm’s 12.6% take rate was an improvement from 11.6% the year before mainly due to lower refunds, credits, and discounts, which indicated enhancement in the quality of service and continuing strong demand from consumers. Total revenue of $1.8 billion was up 40% year over year.

For the full year, monthly average user count stood at 32 million, up 28% year over year. We estimate 16% growth in users excluding Wolt. Overall user frequency dipped 2%, but we estimate that excluding Wolt, full-year user frequency increased by around 4% from 2021.