DoorDash Stock Slips as Company Faces Pressure from Rising Labor Costs 

DoorDash Stock

DoorDash (NASDAQ:DASH) projected a quarterly profitability metric below Wall Street’s forecasts, citing elevated labor expenses that overshadowed a surge in delivery volumes, causing its shares to plummet over 8% in after-hours trading.

The delivery giant, which also disclosed a larger-than-expected loss for the fourth quarter ending Dec. 31, attributed its financial struggles to increased minimum pay for delivery workers in compliance with new regulations.

Ravi Inukonda, DoorDash’s chief financial officer, addressed the issue during a post-earnings call, acknowledging the absorption of regulatory costs in Q1, with expectations for a gradual decline over time.

In efforts to expand its customer base, DoorDash has aggressively invested in marketing and broadened its core restaurant delivery services to encompass groceries, convenience items, and alcohol. Consequently, its total costs and expenses climbed 9.3% in the fourth quarter.

The company anticipates adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for the current quarter to range between $320 million and $380 million, falling short of the average analyst estimate of $355.3 million, as per LSEG data.

Uber (NYSE:UBER), a competitor in the delivery business, reported a 6% growth in quarterly revenue for that segment last week. Moreover, Uber announced its inaugural share buyback program worth $7 billion, propelling its stock to a record high.

In response, DoorDash revealed plans to repurchase up to $1.1 billion in shares this year, after witnessing a more than doubling of its stock price in 2023.

Analyst Blake Droesch from Insider Intelligence suggested that DoorDash’s performance might have suffered from inflated expectations following Uber’s earnings report.

During the December quarter, DoorDash experienced a 23% increase in total orders, reaching 574 million compared to the previous year. Revenue surged by 26.7% to $2.30 billion, slightly surpassing estimates of $2.24 billion. However, the company reported a loss of 39 cents per share, far exceeding LSEG’s estimated loss of 16 cents.

As we peer into the future toward 2024, DoorDash anticipates that its gross order value (GOV), a vital measure encompassing the overall worth of all app orders and subscription fees, will fall within the range of $74 billion to $78 billion. This projection marks a notable increase from the $66.8 billion recorded in 2023.

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