Despite food price inflation, online ordering, tracking, contactless delivery, and efficient and secure payment solutions have driven the growth of food delivery companies amid the resurgence of COVID-19 cases over the past year.
The easing of COVID-19 restrictions was expected to slow the food delivery market’s growth. However, as food away from home appears cheaper now due to food inflation's growing impact, the food delivery market should keep growing. The global online food delivery market is expected to grow at an 11% CAGR to $192.16 billion in 2025.
Given this backdrop, Wall Street analysts expect prominent food delivery stocks Uber Technologies, Inc. (UBER) and DoorDash, Inc. (DASH) to rally by more than 80% in price in the near term.
Uber Technologies, Inc. (UBER)
San Francisco-based UBER is a technology platform that offers multi-modal people transportation, ridesharing, restaurant food delivery, payment processing solutions, and freight carrier and shipper connections worldwide. The company operates through three segments─Mobility; Delivery; and Freight.
On Jan. 25, 2022, UBER announced its new partnership with Smart & Final Stores, Inc., a chain of warehouse-style food and supply stores, to expand its on-demand and scheduled grocery delivery to customers across the West Coast. The partnership should enable UBER to meet customers' demands for more high-quality products, including alcohol, and deliver them seamlessly at value prices.
UBER’s revenue for its fiscal 2021, third quarter ended September 30, 2021, increased 72.2% year-over-year to $4.85 billion. The company’s adjusted EBITDA was $8 million for the quarter, versus a $625 million loss in the prior-year period. UBER had $6.48 billion in total cash and cash equivalents as of Sept, 30, 2021.
Analysts expect the company’s revenue to increase 52.8% year-over-year to $17.02 billion for fiscal 2021, ended December 31, 2021. It surpassed the consensus EPS estimates in three of the trailing four quarters.
The stock has fallen 11.4% in price over the past month and closed yesterday’s trading session at $37.17. All 18 Wall Street analysts rating the stock have rated it a Buy. The stock's $68.67 average price target indicates 84.8% upside potential.
DoorDash, Inc. (DASH)
DASH operates a logistics platform that connects merchants, consumers, and dashers internationally. The company’s merchant software portal allows merchants to track business performance on several metrics. Its subscription product, DashPass, serves as a membership program and offers consumers access to merchants. DASH is based in San Francisco.
On Nov. 2, 2021, Ulta Beauty, Inc. (ULTA), a beauty retailer, partnered with DASH to offer same-day delivery from select ULTA stores, with plans to expand and roll out more broadly in 2022. Offering same-day delivery services through DoorDash Drive should enable DASH to benefit from growing demand in the coming months.
DASH’s revenue for its fiscal 2021 third quarter, ended Sept. 30, 2021, increased 45.1% year-over-year to $1.28 billion. The company’s adjusted gross profit came in at $709 million, representing a 41.5% year-over-year improvement. Its adjusted EBITDA remained unchanged from the prior-year period to $86 million. The company had $2.86 billion in cash and cash equivalents as of Sept. 30, 2021.
The $4.87 billion consensus revenue estimate for fiscal 2021 ended Dec. 31, 2021, represents a 68.6% rise from the prior-year period.
DASH’s stock has fallen 30% in price over the past month and ended yesterday’s trading session at $104.17. Of the 20 Wall Street analysts that have rated the stock, 11 have rated it a Buy, while nine rated it Hold. Analysts expect the stock’s price to hit $236.13 in the near term, representing 126.7% upside potential.
UBER shares were trading at $35.21 per share on Thursday afternoon, down $1.96 (-5.27%). Year-to-date, UBER has declined -16.03%, versus a -5.27% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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