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Is DoorDash Stock a Solid Long Term Investment?


When it becomes more challenging for people to make money in the same way that they have made it in the past, they often turn to different and more creative ways of ensuring that they can pay the bills. For some individuals, that includes investing in stocks that they might not have even considered a year or two ago. One of those stocks could potentially be DoorDash, the company that has genuinely made a name for itself during the pandemic as a restaurant delivery service. On the off chance that you're not familiar with it, they are an independent company that partners with various restaurants in all kinds of locations. The idea is that you place an order from your favorite restaurant and, if DoorDash provides service in your area, they deliver it straight to your door. It sounds like an interesting enough concept and it has been one that is proven to work during a global pandemic. That said, is it something that's worth investing in, in the long term? The answer to that question depends on who you ask.

Should You Invest?

One of the more concerning things about investing in DoorDash involves whether or not you could potentially lose your shirt when you do so. The numbers don't exactly look great. Despite the fact that they are arguably doing more business than they have ever done as a direct result of the pandemic, their numbers are way off. As a matter of fact, their profits have fallen off more than 27% since December of 2020. If you look at their profits for the past 12 months, they are more than 50% behind last year's earnings. Clearly, this is a cause for concern. They're also lagging behind their last quarterly earnings. This begs an important question. If they are doing more business than they have done in the past because more people are relying on these types of services, why are their profits so far behind what they were making before the pandemic? It could potentially be because they are so busy that they have been forced to expand, thereby eating into their profits. However, there could be a lot of other reasons that their profits are sliding as well. Before you decide to invest, it's crucial that you do more investigation in order to find out why their profits are down. Otherwise, you could be engaging in a very risky decision if you decide to invest any appreciable amount of money into the company in hopes of making anything back in the long-term.

Finding Answers

In February of this year, DoorDash was selling stock at a record high of $256 per share. That's impressive, considering that they only went public in December of last year at a rate of $106 per share. On their first day of trading, stocks were selling for $182 per share. One would believe that during a pandemic, when the company claims to be busier than ever, that these numbers would only continue to go up. However, exactly the opposite has occurred. Most recently, their stocks are down to $160 per share. Considering that they were selling for $22 a share more as recently as six months ago, that's quite a big decline. That means that it's time to find answers to some tough questions in order to sort through all the red tape and find out what is causing the root cause of the problem. As it turns out, there are a lot of potential issues that are coming into play.

For one thing, investors are finding it increasingly difficult to accurately compare a company's profits from one quarter to the next during a global pandemic. In fact, many financial experts say that the entire market is so volatile that it is virtually impossible to determine with any degree of accuracy how a company’s stock will ultimately perform even three months down the road, not to mention six months or a year. In addition, there were also issues with raising additional funds in order to pay for overhead and train more employees in order to cover the sudden demand that came with operating during a pandemic. The thing that makes investors nervous is that they don't know for sure if these are all of the concerns. Their biggest fear is that there is something more sinister lurking within the walls of the company, something that can't always be seen until it is too late. This has made a lot of investors weary about buying any additional stock in the company.

What’s Really Going On?

If you are considering investing, you probably aren't really any closer to making a decision than you were when you started reading. Remember that part about it being based on who you ask? Unfortunately, that seems to be the case in a lot of situations that involve investing. However, it is important to consider that while people have different opinions about whether or not you should invest in DoorDash, there is one final thing that you should consider. This particular stock opened much higher than anybody ever expected, at roughly two to three times the price that the company had initially set when they decided to go public. The stock then quickly shot up to an all-time high and then, it just as quickly plummeted to a level that was far below what most investors would have expected to see at this point. It comes down to the fact that by all accounts, DoorDash doesn't have the staying power at this point in time to be an effective long-term investment. Is it possible that that could change at some point in the future? Of course. As is usually the case, the possibilities are endless. However, that doesn't change the fact that it's probably not your best option for a long-term investment right now. The fact is, there are other companies out there that could serve as a better option for a long-term investment. If you want to make money instead of losing it, you should probably choose to go with something different for the time being.

Allen Lee

Written by Allen Lee

Allen Lee is a Toronto-based freelance writer who studied business in school but has since turned to other pursuits. He spends more time than is perhaps wise with his eyes fixed on a screen either reading history books, keeping up with international news, or playing the latest releases on the Steam platform, which serve as the subject matter for much of his writing output. Currently, Lee is practicing the smidgen of Chinese that he picked up while visiting the Chinese mainland in hopes of someday being able to read certain historical texts in their original language.

Read more posts by Allen Lee

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