(Bloomberg) -- Shares of DoorDash Inc. had their biggest same-day gain in nine months after the company reported a stronger-than-expected profit forecast for the current quarter, affirming that customer demand is resilient and that a plan to push into new categories beyond restaurants has been paying off.
DoorDash said Thursday that it expects adjusted earnings before interest, tax, depreciation and amortization for the current quarter of $470 million to $540 million, beating the consensus analyst forecast of $449.2 million. In the second quarter, DoorDash reported adjusted Ebitda of $430 million, ahead of analysts’ expectations.
Shares jumped as much as 10.5% to $119.59 after markets opened Friday, the biggest intraday gain since November and a rare bright spot in an otherwise grim week for tech stocks.
The company has been adding new merchants to its marketplace, especially under new verticals such as grocery, beauty, home improvement and sporting goods. DoorDash announced new partnerships in the second quarter with Ulta Beauty Inc. and Michaels Stores Inc., among others. Progress in these categories, as well as growth in DashPass subscription members and new cost efficiencies, have helped increase overall order frequency, according to the company.
Total orders increased 19% to 635 million in the three months ending in June, exceeding the average analyst estimate of 627 million. The gross value of those orders — a key metric for online delivery firms — jumped 20% to $19.7 billion, also surpassing Wall Street’s estimates.
DoorDash, which holds a market-leading share of US food delivery sales over competitors Uber Eats and Grubhub, has been able to buck macro headwinds of softer consumer spending to deliver the better-than-expected results, analysts from Barclays to Evercore ISI said. That’s even as overall orders growth has been slowing from the elevated rates coming out of the pandemic, as people returned to shop in stores and rivals offering increasing selections.
“We’ve heard many companies in EU food delivery, consumer discretionary,and the restaurant space flagging consumer weakness,” Barclays researchers led by Ross Sandler wrote in a note. DoorDash “continues to defy gravity with its execution and consistency amid a challenging end market.”
The company has not provided a timeline for when it expects to become operationally profitable, although analysts currently expect it to hit this milestone by the fourth quarter of 2024, driven by improving margins in international markets and new verticals.
The delivery company’s net loss was $157 million in the second quarter, much more than the $47.95 million analysts expected. DoorDash said the loss was driven primarily by one-time litigation and office lease expenses. But the company said it does not expect these litigation expenses to have a long-term impact on operations.
DoorDash said there is “increasing legislative and regulatory certainty” following California’s ruling last month to uphold Proposition 22, a law allowing gig economy companies to classify their drivers as independent contractors. Had the judge ruled to overturn Prop 22, the companies would have faced the threat of millions of dollars in additional costs to pay drivers if they were to be reclassified as employees, upending their business models and potentially raising user costs in one of their biggest US markets.
(Updates with share move after the Friday open and analyst comments.)
©2024 Bloomberg L.P.