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DoorDash Inc Ordinary Shares - Class A DASH

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Lower California Court Rules Prop 22 Unconstitutional; Firms Will Appeal; Uber, Lyft Undervalued

Ali Mogharabi Senior Equity Analyst

Analyst Note

| Ali Mogharabi |

On Aug. 20, a California state Superior Court judge ruled in favor of a petition filed by a labor union and some drivers demanding that Proposition 22 be ruled unconstitutional. This decision will not affect the operations of the network firms we cover, including Uber, Lyft, and DoorDash, as Proposition 22, which defines these firms' workers as contractors, remains applicable while the ruling is appealed. While the outcome of the appeal is uncertain, we think the strong support for the ballot measure in the November 2020 election, along with the California Supreme Court’s refusal to hear the case earlier this year, could sway the outcome in favor of Proposition 22. We also expect the appeals process in California to be a lengthy one, which could favor the firms’ efforts to work with other states’ lawmakers or create similar but amended or customized ballot initiatives. We are maintaining our $69, $63, and $142 fair value estimates for Uber, Lyft, and DoorDash, respectively. We believe legal risks are more than priced into Uber and Lyft shares, both of which we view as attractive. DoorDash remains overvalued, in our opinion.

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Company Profile

Business Description

Founded in 2013 and headquartered in San Francisco, DoorDash is an online food order demand aggregator. Consumers can use its app to order food on-demand for pickup or delivery from merchants mainly in the U.S. The firm provides a marketplace for the merchants to create a presence online, market their offerings, and meet demand by making the offerings available for pickup or delivery. The firm provides similar service to businesses in addition to restaurants, such as grocery, retail, pet supplies, and flowers. At the end of 2020, DoorDash had over 450,000 merchants, 20 million consumers, and over 1 million dashers on its platform. In 2020, the firm generated $24.7 billion in gross order volume (up 207% year over year) and $2.9 billion in revenue (up 226%).

303 2nd Street, South Tower, 8th Floor
San Francisco, CA, 94107
T +1 650 487-3970
Sector Communication Services
Industry Internet Content & Information
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Speculative Growth
Employees 3,886