DoorDash (NYSE: DASH) was notably one of the first food delivery services to reach scale. However, the landscape remains competitive and challenging. In this clip from “IPO & SPAC Show” on Motley Fool Live, recorded on April 11, Motley Fool contributors Jason Hall, Nicholas Rossolillo, and Jose Najarro discuss the crowded delivery platform space and address one of the main issues that consumers face.
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Jason Hall: I’m thinking about these platforms, these delivery platforms. You have Uber Eats (NYSE: UBER) and DoorDash and several others. You also have the small players, the regional players, the ones that are focused maybe on New York City or San Francisco that have private equity backing, that sort of thing. I think the endgame here is the ones that get to scale and once we get through this race to scale, those are the ones where these business models can really pay off for investors. Is that the right way to think about this?
Nicholas Rossolillo: I think so and, obviously, DoorDash is one of the first ones that reached that scale. That is an important point you bring up, Jason. Obviously, they are profitable using free cash flow but there are all those regional players. Then, you have the Ubers of the world getting into this space as well and I put on the first slide, there is a big risk here that DoorDash has been highly criticized for non-transparent and egregiously high fees that they charge on their platform. Then, you also have companies like Square (NYSE: SQ), Toast (NYSE: TOST), Olo (NYSE: OLO), these software companies that are providing integrations for restaurants to help them take back control of the customer relationship. That’s also a risk, I think, for DoorDash but you’re right. They were the first to reach scale and I think that’s notable. That’s definitely a notable thing for investors to keep a lookout for with this company.
Jose Najarro: I do want to say, with the current risks that you mentioned with all these fees, it seems like every player out there in the food delivery industry is doing that hidden fee stuff. At the moment, it’s not just an issue to DoorDash. It’s just a whole issue to the overall market, the industry as a whole. Hopefully, for the consumers, that gets fixed pretty soon.