fbpx

    Are food delivery stocks’ best days behind them?

    Victor Lei — Head of Research

    Victor Lei — Head of Research

    June 1, 2021

    food delivery stocks

    June 1, 2021

    Food delivery stocks like Uber Eats, DoorDash and Grubhub are burning heaps of cash — and to fix that, they want you to order more than just food.

    What’s the big deal? Despite a record-breaking year for food delivery stocks, their businesses are still highly unprofitable — which begs the question — will they ever become profitable?

    • According to Deutsche Bank, DoorDash made 90c on the average order worth $36 (2.5%) — the best among competitors, but not enough to cover expenses.
    • So unprofitable that Grubhub, the US’ 3rd largest food delivery app is leaving the game (via acquisition by Europe’s, Just Eats)

    Analysts aren’t expecting them to reach break-even for years. In the hopes of getting there, delivery apps are making changes:

    • Increasing order sizes by lumping food, alcohol and grocery delivery to improve margins.
    • Improving their tech to make deliveries more efficient and reduce delivery time, errors and refunds.
    • Going beyond restaurant deliveries and helping retailers like Walmart, Petco and Macy’s handle their online orders.

    The Joe’s Take: For now, investors are overlooking their lack of profits for growth potential. But eventually, investors will be asking why their order of profits hasn’t been delivered.

    With lockdowns expiring and consumers eager to go out, food delivery apps’ growth is expected to slow. It will be important for these apps to expand beyond food delivery.

    Feeling global? See Grab (NASDAQ:AGC), the Southeast Asia-based food ride-sharing/food delivery company, going public on the Nasdaq…

    Recent Posts