Overview
Uber (UBER) and DoorDash (NYSE:DASH) are the two largest players in the fast-growing digital food delivery business. Both companies posted strong Q1 earnings and each of them beat across both top and bottom line estimates.
A closer look at the metrics indicates that DoorDash is ahead of Uber in certain respects. This article will focus on relative fundamentals and valuation for these two leading B2C logistics companies.
The caveat here is that Uber is significantly more diversified in its offering than DoorDash. Nonetheless, Uber Eats was 35% of its revenues in the prior quarter. Since Uber will also continue to compete in the delivery market with the full weight of its resources, it nonetheless makes sense to compare metrics at the company level for these firms. When available, Uber Eats segment-level financial metrics will be used for comparisons.
Q1 2023 Comparative Metrics
While Uber’s overall business as well as its Delivery segment grew well during the past quarter, DoorDash grew even faster.
|
Q1 2023 |
|
|
Uber Revenue Growth YoY |
29% |
|
Uber Delivery Growth YoY |
23% |
|
DoorDash Revenue Growth YoY |
36.77% |
Source: Excel, Seeking Alpha
The adjusted EBITDA picture is more complex and tilts towards Uber’s favor.
Uber’s overall adjusted EBITDA is much higher and 50% higher than DoorDash’s.
Uber’s Delivery segment has also achieved higher overall adjusted EBITDA than DoorDash’s, although the margin is much lower due to it being only a part of its business. Worth noting is the very significant growth rate that Uber achieved for its Delivery adjusted EBITDA.
|
$MM |
Q1 2022 |
Q1 2023 |
|
Uber Adjusted EBITDA |
$650 |
$1,325 |
|
Uber Adjusted EBITDA Growth YoY |
103.85% |
|
|
Uber Adjusted EBITDA Margin |
9.48% |
15.02% |
|
Uber Delivery Adjusted EBITDA |
$30 |
$288 |
|
Uber Delivery Adjusted EBITDA Growth YoY |
860% |
|
|
Uber Delivery Adjusted EBITDA Margin |
0.44% |
3.26% |
|
DoorDash Adjusted EBITDA |
$54 |
$204 |
|
DoorDash Adjusted EBITDA Growth YoY |
277.78% |
|
|
DoorDash Adjusted EBITDA Margin |
3.71% |
10.02% |
Source: Excel, Seeking Alpha
Now let’s look at operating cash flow. Worth noting is that Uber does not break out operating cash flow per segment.
Both companies here had astronomical growth rates for operating cash flow YoY. This was due to both businesses pivoting their large-scale platforms to a cash-generative mode in the new market environment. Nonetheless DoorDash is currently generating a far superior operating cash margin to Uber.
|
$MM |
Q1 2022 |
Q1 2023 |
|
Uber Operating Cash Flow |
$15 |
$606 |
|
Uber Operating Cash Flow Growth YoY |
3940% |
|
|
Uber Operating Cash Flow Margin |
0.22% |
6.87% |
|
DoorDash Operating Cash Flow |
-$20 |
$397 |
|
DoorDash Operating Cash Flow Growth YoY |
1965% |
|
|
DoorDash Operating Cash Flow Margin |
-1.37% |
19.51% |
Source: Excel, Seeking Alpha
These financials, and especially the operating cash metrics, lead me to conclude that DoorDash is a better option for an investor purely seeking exposure to digital food delivery.
While I have previously described the benefits of owning Uber stock, it is subpar when it comes to the food delivery space relative to DoorDash. DoorDash is growing revenues faster than Uber in this space while also posting a significantly better cash operating margin; it’s the clear choice at the moment.
The next section will focus on overall relative valuation for these two firms.
Valuation
Uber and DoorDash are formally classified as part of the Industrials and Consumer Discretionary sectors, respectively.
While I think consumer discretionary is a sensible sector comparison for these two, I don’t think Industrials is. Companies in the Industrials space are capital-intensive businesses with large amounts of fixed assets. This does not apply to either Uber or DoorDash as they are asset-light software companies providing B2C logistics services.
As such I believe it is worth evaluating the relative valuations here as compared to the Consumer Discretionary Sector as well as the Information Technology sector. Since both firms have recently turned the corner on operating cash flow I think it is best to utilize this metric in order to derive a cash flow multiple for these companies.
While the trailing twelve month valuations here are fairly dispersed, the one-year forward valuations are remarkably close for these two companies.
DoorDash is marginally cheaper on a forward basis. While this valuation can be considered fair, we can rest assured that it isn’t overpriced already. When we consider this valuation metric with its significant outperformance (vs Uber) on operating cash flow, DoorDash looks like a buy.
|
TTM Q1 2023 |
FWD Q1 2023 |
|
|
Uber Price/Op Cash Flow at Market Cap ($78.59B) |
63.73 |
27.49 |
|
DoorDash Price/Op Cash Flow at Current Market Cap ($25.94B) |
33.09 |
26.94 |
|
Consumer Discretionary Sector Median |
11.10 |
8.94 |
|
Uber Valuation Premium |
574.14% |
307.49% |
|
DoorDash Valuation Premium |
298.11% |
301.34% |
|
Information Technology Sector Median |
18.87 |
17.61 |
|
Uber Valuation Premium |
337.73% |
156.10% |
|
DoorDash Valuation Premium |
175.36% |
152.98% |
Source: Excel, Seeking Alpha
Conclusion
In its core market, DoorDash is outcompeting Uber (for the time being) and is priced well to boot.
Considering DoorDash’s recent progress on fundamental metrics as well as its continued growth, I’m going to call it a buy.
Read the full article here