DoorDash Forecasts Quarterly Profitability Metric Below Expectations

DoorDash issued a forecast for a quarterly profitability metric below Wall Street expectations on Thursday, citing elevated labor costs that overshadowed a surge in delivery orders. This announcement led to a decline of over 8% in its shares during extended trading.

The delivery company, which also reported a wider-than-expected loss for the fourth quarter ending Dec. 31, noted that it has raised minimum pay for its delivery workers in response to new regulations.

Ravi Inukonda, DoorDash's chief financial officer, explained during a post-earnings call that the company is absorbing some regulatory costs in the first quarter, with expectations for these costs to diminish over time.

In its efforts to attract more customers, DoorDash has been heavily investing in marketing and expanding its core restaurant delivery business to encompass grocery, convenience, and alcohol delivery. However, this expansion contributed to a 9.3% increase in total costs and expenses during the fourth quarter.

DoorDash anticipates its current-quarter adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to range between $320 million and $380 million, falling short of the average analyst estimate of $355.3 million, according to LSEG data.

Competitor Uber, which also operates a delivery business, reported a 6% growth in quarterly revenue in that segment last week. Moreover, Uber's announcement of its inaugural share buy-back program worth $7 billion propelled its stock to a record high.

In response, DoorDash unveiled plans on Thursday to repurchase up to $1.1 billion in shares this year, following a significant increase in its stock price in 2023.

Despite a 23% rise in total orders to 574 million in the December quarter and a 26.7% increase in revenue to $2.30 billion, DoorDash reported a loss of 39 cents per share, surpassing LSEG estimates of a 16 cents loss.

Looking ahead, DoorDash forecasts gross order value (GOV) for 2024 to range between $74 billion and $78 billion, compared to $66.8 billion in 2023, indicating its continued growth trajectory.

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