#Doordash shares surge 15 percent on surprisingly strong sales

DoorDash shares surged more than 15 percent after the food delivery giant reported better-than-expected quarterly results, signaling that customers are still ordering in instead of going to restaurants despite the rise in vaccinations.

Sales swelled by 198 percent to $1.1 billion in the first quarter ended March 31, beating Wall Street’s expectations. But the company’s losses at $110 million were surprisingly steep as a shortage of drivers dragged down margins.

“Stronger-than-expected consumer demand, along with extreme weather events and the impact of stimulus checks, resulted in a meaningful undersupply of Dashers in the latter part of Q1,” company executives told investors in a letter late Thursday.

“Stimulus checks created a particularly acute challenge, as we believe they drove a short-term increase in consumer demand and a simultaneous decrease in Dasher hours,” the letter added.

The San Francisco-based app raised its guidance for the year to $35 billion to $38 billion in gross orders from a range of $30 billion to $33 billion.

“We are encouraged by the consumer behavior we have observed thus far and are more optimistic with regard to our full-year prospects,” executives wrote in a letter to shareholders.

DoorDash shares recently changed hands at $133.65 on Friday, up more than 15 percent.

The company has become the dominant player in food delivery over the past year, leapfrogging rival GrubHub to command 56 percent of the market, according to Bloomberg Second Measure. 

But experts say the industry’s growth is bound to be curtailed this year as more consumers get vaccinated and resume eating in restaurants instead of ordering takeout and going to stores in person to do their shopping.

The industry’s growth during the pandemic has been fueled by “artificial demand” that will largely evaporate after consumers return to their pre-COVID lives, according to a recent academic report co-authored by Daniel Minh McCarthy, a marketing professor at Emory University’s Goizueta Business School.

The report claims the industry had been poised for decelerating growth in 2020, which was sharply reversed after COVID-19 restrictions were implemented.

To that end, DoorDash has been expanding beyond food delivery into other categories, including groceries, pet supplies and flowers.